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Ford's European Capacity at Limit

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Ford’s capacity is at its limit

Booming demand from Russia stretches automaker’s European factories

Tony Lewin | Douglas A. Bolduc | Automotive News Europe / October 16, 2006 - 1:00 am

Ford of Europe’s manufacturing capacity is under strain because of booming sales in Russia.

Ford expects to sell more than 120,000 cars in Russia this year, double last year’s total, said John Fleming, Ford of Europe CEO.

“We could sell at least 100,000 more [cars in Russia] if they were available,” Fleming said.

To meet demand for its cars, Ford is:

* Operating six of its seven European plants (including those in Turkey and Russia) at 100 percent capacity or more. The seventh plant, Genk in Belgium, likely will add a third shift when the new Mondeo upper-medium car starts production early next year

* Bidding to buy the 200,000-unit capacity Daewoo Automobile Romania plant

* Increasing capacity at its Turkish joint-venture plant by next year to 280,000 vehicles from 240,000.

In August, the Russian Economic Development and Trade Ministry said Ford will raise production of its lower-medium Focus at its 60,000-unit capacity St. Petersburg, Russia, factory and add Mondeo and Maverick SUV production there. Fleming did not confirm this. “We are looking at it but have not made any decision yet,” Fleming told Automotive News Europe at the Paris auto show.

Currently Ford sells the European-built Mondeo, Galaxy, Fusion, Fiesta and Transit in Russia, together with the US-built Maverick, Explorer and Expedition SUVs.

Bidding war

Ford’s sales in Europe were down 2.7 percent through August to 1.09 million units, according to ACEA, the European car manufacturers association. But if sales in Russia, Turkey and other eastern European markets are included, Ford is up 1.5 percent to 1.14 million, the company says.

In the past five years, Ford has reduced its European assembly plants from 11 to seven and cut 9,300 jobs.

During the restructuring some analysts warned that Ford was cutting too deeply.

But Fleming said Ford of Europe would not be as profitable as it is today if it had not reduced its capacity. “It is much easier to go up and squeeze more volume than it is to come down if you are wrong,” he said.

Fleming said Ford will not build a new plant in Europe. “I am pretty conservative on adding capacity because from 2001 to 2005 I have spent all my time in Europe taking capacity out.”

If Ford wins a bidding war against General Motors and Chery Automobile to buy the Romanian plant, it plans to use the factory to boost its overall capacity.

“It is part of a growth strategy,” said Fleming.

Fleming said Ford had not decided which cars it would produce in Romania if it gets the factory. He said the plant would give Ford a low-cost manufacturing base to boost its sales in the emerging markets of central and eastern Europe. “It is a manufacturing plant with enormous opportunities,” Fleming said.

The Romanian government owns 49 percent of Daewoo Romania. It will sell the plant early next year when it completes the purchase of a 51 percent stake from creditors of Daewoo Motor, the plant’s former owner, which went bankrupt in 2000.

Last year, the factory, which is in Craiova, made 21,000 cars, mainly the Daewoo Matiz minicar under license from GM subsidiary GM Daewoo Auto and Technology.

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