Thursday, September 13, 2007

Ford looks east with Romania deal

By John Reed in Frankfurt
Financial Times
Sept. 12, 2007

Ford Motor said that it had reached agreement with Romania's government to buy a car plant where it is due to make more than 300,000 vehicles and engines a year.

The company was the sole bidder for the Automotive Craiova plant, where it will make small cars and possibly commercial vehicles, said John Fleming, Ford of Europe's president.

Ford will pay Romania's government €57m ($79.2m) for its 72.4 per cent stake for the Craiova plant, formerly owned by bankrupt Daewoo. The Romanian state bought back control of the plant from the South Korean carmaker's creditors last year.

Ford will offer to buy out the plant's minority shareholders, and said it would spend another €675m to upgrade and modernise the plant.

By 2012 it said it expected to be spending about €1bn a year in Romania to support the Craiova operations. Mr Fleming would not comment on the specific vehicles Ford planned to assemble in Romania. The company this week unveiled a prototype of its new global subcompact car, the Verve.

Most recently, Ford's US rival General Motors has been assembling Daewoo Matiz and other cars in Craiova as part of its GMDat joint venture, which owns some Daewoo plants and model rights.

GM, which is expanding its operations in Poland and assembles cars in Russia and Ukraine, examined but held off on making a final bid, as did Russian Machines, controlled by billionaire Oleg Deripaska.

GM is not commenting on its reasons for pulling out, but is understood to have done so due to financial liabililties attached to the plant.

Ford of Europe reported a $425m profit last year and a profit of $485m for the first half of this year, in spite of the record losses at the carmaker's core North American operations.

Its investment in Craiova comes as it and other carmakers seek to add manufacturing assets in Eastern Europe, where demand for motor vehicles is booming.

Rick Wagoner, GM's chief executive, told the Financial Times this week that his company, which is building a plant in St Petersburg, was looking to add capacity in Russia – one of the world's fastest-growing car markets.

No comments: