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Continued: Late to the Chinese auto market, Ford aims to catch up with new cars, new plants, new attitude

  • Article by: DEE-ANN DURBIN , AP Auto Writer
  • Last update: July 9, 2013 - 9:40 AM

Ford re-entered China in 1997, around the same time as GM. But Ford focused on the commercial van market, which was limited. GM and its Chinese partners — SAIC and Wuling — grew quickly by selling Wuling minivans and Buicks to the mass market.

Ford's attention was elsewhere. SUV sales were booming at home. The company was buying up luxury brands like Jaguar and Volvo with the profits. No one at headquarters anticipated that the Chinese market was about to take off.

"If I had gone to management in Dearborn and tried to convince them that China would be 20 million units in 2013, they would have really started to worry about me," Schoch says with a laugh.

The company soon realized its error. It formed a partnership with Chinese automaker Changan Automotive in 2001 and began building the Fiesta in China two years later. But with its new luxury brands, high labor costs and bloated bureaucracy, it had a limited amount to invest.

In 2006, Ford named a new CEO, Alan Mulally, to help stem its billion-dollar losses and end executive infighting. A few months after Mulally's arrival, Ford borrowed $23.6 billion and used it to close plants, cut its workforce, improve key products and meld global operations. Mulally sold or discontinued every brand but Ford and Lincoln. By 2009, Ford was profitable again, and turned its sights on China.

Schoch says Mulally asked him in 2011 if he would return to China. Schoch's only question was whether Ford was committed to the country. Mulally didn't hesitate.

"Yes, from the board of directors on down," he said, according to Schoch. It was a defining moment for Schoch.

Last month, Mulally visited China for the third time in less than a year. He was there to open a $500 million engine plant in Chongqing (chong-CHING'), an industrial city of 30 million in southwestern China, where suburban industrial parks are rapidly filling with carmakers and auto suppliers. Chongqing is now Ford's largest manufacturing base outside Michigan.

Mulally was also in Chongqing last August, to break ground on Ford's third assembly plant there, a $600 million facility that will be completed in 2014.

During that trip, hundreds of uniformed workers — many of whom are former soldiers — stood in precise rows as Mulally warmly praised local leaders for their "pro-business" policies. Chongqing's government was the first in China to offer subsidies to residents who buy locally made vehicles, which has boosted Ford's sales in the region. At the end of the ceremony, confetti rained down and rainbow-colored smoke shot into the air, adding another layer of haze to the city's thick, yellowish sky.

A few days later, the executives touched down amid the rice fields and large, neo-Victorian houses of the wealthy southern city of Hangzhou. Ford is building one of its assembly plants there, in an immaculate new office park on the outskirts of the city. The $760 million plant is expected to produce 250,000 vehicles per year when it's completed in 2015.

In Hangzhou, Mulally and the others were greeted by Chinese women in traditional silk gowns — blue and white, like Ford's logo — and quickly ducked into an air-conditioned tent to meet with local politicians. Later, the executives scooped up dirt with red-ribboned shovels. When the ceremony ended, rainbow smoke once again shot into the sky, accompanied by booming golden cannons.

On the wall of his office in Dearborn, Mulally has a copy of an ad that Henry Ford published in the Saturday Evening Post in 1925. The ad was titled "Opening the Highways to All Mankind," and reflected Ford's wish to make vehicles available to everyone. Schoch says he's living Henry's dream.

Schoch, 61, joined Ford in 1977 as a financial analyst. His career includes stints as chief financial officer for Europe and operations manager for Canada, Mexico and South America. Despite his long international career, the thoughtful, down-to-earth Schoch doesn't seem jaded. He spends many weekends dropping in on dealerships near the home he shares with his wife in Shanghai. He's giddy when he sees first-time Chinese buyers, surrounded by family members, getting their first set of keys.

"Take yourself back to when you were a teenager and you got your first vehicle, and what it felt like, and you can see what it means for the Chinese customer," Schoch says.

Ford hopes its manufacturing base in Chongqing, far from China's crowded eastern coast, will help it attract rural buyers in the still largely untapped markets in western China. For those buyers, Ford is developing a low-cost car to compete with the $9,500 Chevrolet Sail.

Ford will use Lincoln to make a play for China's booming luxury market, which is dominated by German brands like Audi and BMW. Lincoln used to be the best-selling luxury brand in the U.S. but fell behind when Ford started focusing on other luxury brands. Ford's effort to revive the brand began this year with the launch of the Lincoln MKZ sedan in the U.S.

"Chinese consumers buy on image and prestige and the message that they project to their family and co-workers and friends," Dunne said. "With a luxury brand like Lincoln, it gives them a chance to say, 'Hey, see my American luxury car that I drive? Do you have one of these?'"

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