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Aug 03, 2009

Ford production to drop by 50%, SA market turnaround to be slow – Feder

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Ford Motor Company of Southern Africa (FMCSA) will produce 28 000 units at its Silverton plant, in Pretoria, this year, compared with 55 000 units last year, says president and CEO Hal Feder.

Similar to all other vehicle manufacturers in South Africa, Ford has been forced to cut back production in the face of sharply declining demand.

Feder says Ford production is down 40% for the domestic market, and 60% for the export market.

FMCSA manufactures the Focus for the Australian market.

“We'll export 8 500 units this year,” notes Feder.

FMCSA has trimmed its staff component to adjust to a much smaller automotive market, with 1 300 people leaving the company's employment in a voluntary retrenchment programme since August last year.

This number includes hourly and salaried staff, in Silverton and in Port Elizabeth, where the company has an engine manufacturing plant, explains Feder.

FMCSA currently employs 2 700 people.

“We have taken out R720-million in inventory costs since the beginning of the year, from components to finished goods,” adds Feder.

He expects the local market to reach its bottom somewhere in the next six months, and to then climb gradually.

“I think it will be a slower climb than we all want, and it all depends on global economic trends.

“I hope to see some growth, maybe around 5%, over the next year.”

Feder anticipates a local market of 380 000 to 390 000 new vehicle sales this year.

He says Ford is placed fourth in terms of market share in South Africa, its slice of the pie for the first six months of the year growing by 0,4% compare with 2008. The only other top five brand which has gained market share in 2009 is Volkswagen.

Feder also notes that FMCSA's R1,5-billion investment programme in the local production of a new generation pick-up, at a volume of 90 000 units a year, as well as the Puma diesel engine, is “under review, but still on track”.

Engine production is scheduled to start in 2010, and vehicle production in 2011.

“We are proceeding through the gateways. We're also looking at localising as much of the parts as we can,” says Feder.

He says FMCSA is talking to “four big potential investors” to establish operations in South Africa for the vehicle and engine production programmes.

“They are new suppliers, and it looks as if two of the four may partner with existing local  [component] suppliers.”

Feder says South African vehicle manufacturers are working hard at the localisation of parts, as this will render the local manufacturing base more competitive compared with other countries.

“We are partners in the plant – there is a lot of cooperation between original equipment manufacturers – but competitors in the showroom.

“The local industry, through the  National Association of Automobile Manufacturers of South Africa, is working more collaboratively than ever before.

“The aim is to keep manufacturing vehicles here, in South Africa. Yes, we compete in terms of sales, but when it comes to manufacturing, Ford in South Africa competes with Ford in Thailand to secure manufacturing contracts.”

As regarding Ford's economic viability, Feder says the US vehicle manufacturer is “staying away from the Bank of Obama” – referring to US president Barack Obama.

Both Chrysler and General Motors earlier this year accepted a federal bailout in an attempt to return to financial viability.

Ford managed to cut costs and gain US market share in the second quarter of the year.

“Our liquidity is good,” says Feder. “We have over $20-billion cash on hand.”

Edited by: Creamer Media Reporter
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