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Ford Says Russian Market on Mend

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Ford Says Russian Market on Mend

By Byron Pope

WardsAuto.com, May 14, 2010 9:00 AM

Ford Motor Co. ZAO expects better days ahead, as Russia slowly recovers from the global economic recession and vehicle sales show signs of a rebound.

Mark Ovenden, former marketing director of Ford of Britain, took the helm as president of Ford’s Russia division earlier this year following the departure of Nigel Brackenbury, who was named director-customer service for Ford of Europe.

Ovenden had been serving under Brackenbury as vice president of Ford ZAO since November 2008, and was named to his new position just as the promising Russian auto market was beginning to show cracks under pressure of the global recession.

“The global crunch hit the day I arrived,” Ovenden tells Ward’s in a recent phone interview. “(The Russian market) went from about a 3 million-unit industry in 2008, to about half that in 2009.”

Economic conditions are improving in Russia largely due to the rising price of crude oil, a main export of the country, Ovenden says.

“Oil prices are up to $80 for a barrel, and that’s good for economic activity in Russia and the strengthening of the ruble,” he says.

As the economy improves, so does consumer confidence, assisted by the Russian government’s vehicle-scrappage program.

Launched in March, the scheme provides RR50,000 ($1,644) toward the purchase of a new vehicle to consumers trading in a car at least 10 years old. The program is capped at 200,000 vehicles.

While beneficial to all auto makers in Russia, the program largely is bolstering the bottom line of domestic manufacturers, especially OAO AvtoVAZ’s Lada brand, Ovenden says.

The lowest-priced Lada model is about RR150,000 ($4,931), whereas a Ford Focus is about RR600,000 ($19,727).

To date, Ford has garnered about 2,000 orders due to the program.

“We’re very happy with what we’ve done so far on the utilization program,” Ovenden says. “Of all the mainstream Western cars, the Focus is by far doing the best. The only ones beating us are the domestics, and the Renault Logan.”

While the economic recession devastated the Russian auto industry, it also may have spurred banks and auto makers to make credit more readily available in a market where vehicles are typically purchased with cash.

During the economic crunch, the ruble rapidly lost value against the euro, making the “visual” price of the car go up, Ovenden says.

Ford says Focus benefitting from Russia’s scrappage program.

“It’s still a cash market, but the credit market started to grow last year,” he says, noting Ford Motor Credit Co., the auto maker’s captive finance arm, does not have a presence in Russia.

Ovenden expects Russia to rebound to about 3 million units by 2014-2015, but warns that prediction is “hugely dependent on the price of oil.”

Still, the executive is optimistic the forecast will hold, noting the auto maker likely will see a “V-shaped recession” in which it exits as quickly as it entered.

“Russia has every raw material it needs to come out (of the recession), provided the rest of the world picks up,” Ovenden says. “It still remains one of the growth markets for Ford.”

Meanwhile, Ford ZAO’s St. Petersburg plant, which assembles the Focus in four body styles and earlier last year added the Mondeo sedan, is operating on just two shifts.

“We can’t bring it up to three shifts,” Ovenden says. “At the moment, the industry is not strong enough. We’ll continue to monitor it, and (adding a shift) is something we’d do at some point in the future if the rebound continues.”

The facility employs some 2,000 workers and produces about 65,000-70,000 units annually. At full, 3-shift capacity, the plant can produce about 125,000 vehicles a year, Ovenden says.



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