By Christina Rogers
Responding to slowing growth in China, Ford Motor Co. trimmed
factory production in the first quarter to avoid having to match
the price cuts taken by other auto makers recently in the country,
the company's Asia chief said Thursday.
"We have seen a little bit of a slowdown in showroom traffic,"
said Dave Schoch, Ford's group vice president of Asia Pacific. "If
there is softness in the market, I won't let stocks build and we'll
cut production."
The reductions aren't widespread and only target certain models,
Mr. Schoch said, declining to name which ones. Ford is trying to
resist price cuts to preserve the value of its cars, he added, but
it is monitoring steps taken by its rivals "closely."
The move comes as Ford and other car makers continue to add
factory capacity in China even as sales growth in broader auto
market tapers off, particularly for the foreign car brands, amid
slowing economic growth in the country.
Last year, Ford brought two new plants online in China and
opened another one in the first quarter of this year, hoping to tap
a market that it expects to grow from 24 million last year to 32
million in 2020. In April, Ford and its Chinese partner announced
it would make another big investment, spending 6.6 billion yuan
($1.08 billion) to retrofit a struggling domestic car maker's
factory. The move aims to boosts production capacity by about
200,000 vehicles annually.
By the end of this year, Ford expects to be building 1.9 million
cars in China, the world's largest light-vehicle market.
Despite such projections, the Dearborn, Mich., auto maker last
month cut its industry-wide outlook for the year in China by about
a half-million units, forecasting sales of 24 million to 26 million
in 2015. Ford is also expecting operating profits in Asia Pacific
to fall by more than half this year to 4.5% because of a heavy and
costly new-model launch schedule.
A torrid pace of 10% to 12% growth isn't sustainable," Mr.
Schoch said, nothing that 7% growth is the "new norm."
Mr. Schoch is optimistic, however, that Ford can weather the
economic slowdown in China with a slew of new models arriving this
year, including a new Ford Edge and Taurus, and the expansion of
its premium Lincoln brand.
"We have a lot more cost going into the picture before we
actually get revenue coming out," he said.
General Motors Co. is similarly confident it can keep growing
profits in the region, despite slashing prices on 40 models this
year by as much as 53,900 yuan (about $8,700) to reverse a market
share slide.
Earlier this week, Matthew Tsien, GM's head of China operations,
reaffirmed the company is "well on track" to meet its target of
hitting 9% to 10% margins by selling a richer mix of Cadillacs and
SUVs. Forecasters predict the Chinese market will grow between 6%
and 7% in 2015.
Write to Christina Rogers at christina.rogers@wsj.com
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