In U-turn, Ford ditches plan to unify China sales system after partners push back | The Business Standard
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SUNDAY, JUNE 11, 2023
In U-turn, Ford ditches plan to unify China sales system after partners push back

World+Biz

Reuters
05 September, 2019, 08:40 am
Last modified: 05 September, 2019, 08:49 am

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In U-turn, Ford ditches plan to unify China sales system after partners push back

Capacity cuts as Ford and its partners embark on “right-sizing” their plants are also likely.

Reuters
05 September, 2019, 08:40 am
Last modified: 05 September, 2019, 08:49 am
People walk by a Ford Escape SUV displayed during the media day for the Shanghai auto show in Shanghai, China April 16, 2019/Reuters
People walk by a Ford Escape SUV displayed during the media day for the Shanghai auto show in Shanghai, China April 16, 2019/Reuters

Ford Motor Co has scrapped a plan to create a unified national sales company for China that stoked mistrust of the automaker at its joint venture partners and contributed to a spectacular collapse in sales in the world’s biggest car market.

On the face of it, the plan announced by Ford in June last year to combine sales channels for vehicles manufactured with Chongqing Changan Automobile Co and Jiangling Motors Group made sense. It would promote operational efficiency at its loss-making China operations and is standard practice in most other markets.

But it ignored realities on the ground. Chinese automakers, often in 50-50 partnerships with foreign car makers, are reluctant to lose control over sales decisions, rarely willing to trust each other and loyal to local provinces that are fiercely competitive in their quest for economic growth and tax revenues from vehicle sales.

“I would say there was a lack of deep understanding on how relationships work in China,” Anning Chen, who in October took over as Ford’s third China chief in two years, said in an interview in Shanghai.

It is the first time that Ford, grappling with a host of problems in China that present no quick fix, has disclosed the dropping of the plan - a decision also prompted by a sharp slowdown in China’s economic growth amid the trade war with the United States as well as deeper losses at dealerships.

Many major foreign automakers have 2 or 3 partners in China, involving different marketing and distribution strategies for each partner. Ford is the only one known to have tried combining sales channels for mainstream cars.

Other steps Ford is taking to turn around its China business include launching 30 new or significantly redesigned vehicles over the next three years, reductions in the number of temporary workers at plants, hiring more local Chinese, and putting profits before growth in market share.

Capacity cuts as Ford and its partners embark on “right-sizing” their plants are also likely, Chen said.

A recovery would help relieve pressure on the US automaker which is also scrambling to end losses in Europe through plant closures and layoffs. It would also mitigate the risk that Ford ends up a marginal player in China - a market with annual sales of some 28 million vehicles that many foreign automakers now consider their most important.

SALES IMPLOSION
The slide in Ford’s sales has been unprecedented for a major global automaker in China. After a peak of 1.08 million vehicles in 2016, sales began faltering in late 2017, then nearly halved last year to 504,488, according to consultancy IHS Markit.

IHS forecasts Ford’s sales will tumble further to 382,882 this year, while LMC Automotive predicts Ford’s China market share will fall to 1.4% compared to 3.8% in 2016.

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China / Ford

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