Friday, 29 June 2012 13:25
American car-maker Ford Motor Co. on Wednesday announced it is closing its assembly plant in the Philippines by December this year, leaving about 250 people jobless.
Peter Fleet, Ford Asean president, who announced the company decision to close its assembly operations, cited poor auto supplier base and lack of economies of scale for the local automotive industry.
"First and foremost, this is a Ford business decision," Fleet said stressing the company's decision did not reflect any government policy, saying they have been happy with the government support to their operations in the country.
According to Fleet, the company had been painstakingly working in the past 18 months to look for vehicle model that could be assembled at its Laguna plant but found no viable plan.
Its Sta. Rosa plant, which has a production capacity of 30,000 units, is only producing a tenth of its total sales in the country with only one model Escape, which has also reached its model life.
"The biggest issue is the size of the local supply base which is not on a scale to make investment straightforward," he said.
He said the 40 percent minimum ASEAN local content cannot be supplied by the Philippine auto parts suppliers but have to be supplied by importing from other ASEAN countries making it unviable.
The second biggest issue is the economies of scale as Ford would like to manufacture scale with full 300,000 assembly capacity like the potentials for its plants in Thailand, India and China.
"Clearly, it is not practical today in the Philippines," he said.
He said its decisions are based on current realities and although have also some future projections just the same they would still have to come up with this decision.
He wished "good luck" to their competitors who still brave doing assembly operations in the Philippines given the current situation.
Ford Philippines managing director Randy Krieger said that the Philippines automotive industry was highly underutilized with capacity utilization of 25 percent.
"That does not make a good business case," said Krieger adding that of the over 130,000 units sold last year only 70,000 units are locally assembled.
"Today's automotive and suppliers in terms of scale do not support a business decision for the Philippines," Fleet said.
"These two issues present the biggest hurdle to move forward,"he said.
While they stressed viability issues, Fleet cannot categorically say whether its Philippine operations have been losing or being subsidized by the overall Ford Group, saying they don't report on a country basis, but rather as a regional group.
The company has been enjoying robust growth in sales and is set to launch three new models in the next three months.
Fleet said they have already informed its employes as there would be about 250 out of 360 who are going to be jobless by end this year. They have also informed government officials of their decision, he said.
If it is any consolation, Fleet promised to bring some of their people to its other operations outside of the Philippines, citing their world class skills. At present, they have 20 people deployed in its various Asian affiliates, he said.
Fleet also announced that they will maintain a wholly-owned Ford distribution arm in the country and plans to double its dealership network to 40 from the current 20.
Fleet emphasized the very supportive government adding they greatly value that but stressed they can no longer operate an assembly here given the two major issues affecting its operations.
Ford closed shop in the 70s when the domestic economy was at its lowest. When it came back in 1998, they were very ambitious and were the country's only volume exporter of completely built up vehicles. It enjoyed all the government perks entitled to a motor vehicle assembler.
When it announced a decision to leave the Philippines again, the scenario this time was so much different than it was the first time they left the country.
This time, the automotive is very upbeat. The industry just came up with a roadmap that paints a rosy scenario for automotive manufacturing in the country and as hub for auto parts exports. The initial roadmap projects a tripling of the current 160,000 unit domestic market by 2020.
Fleet, however, said they made some future projections but just the same they had to make this decision.
Fleet said they had a decommissioning plan for the Sta. Rosa plant following a standard operating procedure for facilities they had shutdown.
Ford placed its total investments at its 21.4 hectare Sta. Rosa plant at US$ 270 million. Its exported over 80,000 CBU packs valued US$ 1 billion. The plant saw the assembly of three models Mazda3, Ford Focus and Ford Escape.
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