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Ford turns China unit into an independent business in push for turnaround

A Ford Mustang is displayed during the 17th Shanghai International Automobile Industry Exhibition. Photo: Getty Images

US automaker Ford Motor will lift the status of its China unit as an independent business from the broader Asia Pacific operations and has named an automobile industry veteran as the new head of the China business, in an effort to turn things around in the Chinese market, where its sales have seen a slump since the beginning of this year.

The China unit will operate on par with the North America unit as Ford's biggest core market and will report directly to the company's global headquarters, with the former Asia Pacific operations being reshaped into a new international markets business unit, said the company recently.

The organizational change indicates Ford's increased focus on the Chinese market, where it aims to introduce 50 new car models by 2025, 15 of which will be either fully electric vehicles or plug-in hybrid cars.

The appointment of Chen Anning, former CEO of Chery Automobile, a Chinese car manufacturer, and former chairman of Chery Jaguar Land Rover, a joint venture with the British automaker, as the new president and CEO of Ford China is also seen as Ford's emphasis on localization in China.

Being an American national who was born in China, Chen can speak fluent Chinese and has more than 10 years of experience working in the country. His appointment ended a nine-month search for a new head of Ford China after Jason Luo, the previous head, suddenly resigned.

Chen will report to Jim Farley, Ford's president for global markets, and his appointment will take effect from November 1.

Ford said that Chen will be responsible for the businesses of imported cars and its China joint ventures, and can help the automaker get back on the course of profitability in China.

In a statement,  Farley emphasized China's "essential" role in Ford's overall profitability and growth, saying that the new structure would enable the China operation to be "more fit as a business", which can better connect the company with Chinese consumers.

Sales drop

Industry experts say that hiring Chen as Ford China CEO would streamline the company's policymaking mechanism and help the company better understand the Chinese market, as car sales in China have been falling due to the country's sluggish economic growth and the China-US trade war, which has raised the tariffs imposed on American-built vehicles.

Ford's car sales in China fell 43 percent in September from a year earlier. In the first nine months, its vehicle sales saw a 30 percent slump in the country. The downturn coincides with the sluggishness of China's automobile market. According to statistics from the China Association of Automobile Manufacturers, in the third quarter, China's sales of passenger cars were down 8 percent compared with the same period of last year.

Last month, Peter Fleet, president of Ford's Asia Pacific operations, attributed the poor sales performance in China to lack of introduction of new products to the country.

Ford is expected to launch a series of new models in the Chinese market with the hope of making a turnaround in the world's largest automobile market.

Nearly 70 percent of consumers in China are first-car buyers, who normally have strong interest in newly launched cars, said Fleet.

In order to promote its car sales in China, Ford has set up a sales service agency with Chinese partner Changan Automobile. The agency, which is affiliated to the joint venture between Ford and Changan, will be responsible for the marketing and sales of all Ford-branded cars sold in China.

Effect of trade war

With US President Donald Trump threatening to slap tariffs on all imports from China, the tariff rate on American-built cars exported to China has hit as high as 40 percent. The tariff war between the two countries has caused deep concerns among the US businesses including Ford.

Ford has said that it will ramp up efforts to build more cars in its Chinese plants to avoid the risks brought by the tariff war, and has deepened ties with its Chinese partners with a focus on the development of Internet-connected electric vehicles.

The company has also cut the profitability forecast for 2018, which it attributes to China's higher import tax and the increasing competition from Chinese automakers.

Possibly, the next step that Ford would take to become immune from the trade war is to increase the ownership of its China joint venture as Germany's BMW has done with its Chinese partner Brilliance Automotive to gain a majority stake in their joint venture, which was considered as a feasible way for foreign automakers to keep more of their profits earned in China.

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