MICHIGAN-BASED Ford Motor Co. announced that it is shutting down its 30,000-unit capacity manufacturing plant in Santa Rosa, Laguna, at the end of the year due to its failure to achieve economies of scale and the lack of parts supplier base in the country.
Ford Motor Southeast Asia President Peter Fleet came over to the Philippines to make the announcement on Wednesday and talk to concerned government agencies, as well as personally inform the company’s workers at the Santa Rosa plant.
Fleet said the decision to cease manufacturing operations in the Philippines was reached after an 18-month process in which the company reviewed its regional operations to determine how it can optimize its production in the region. He added that it was determined that the best scenario is to focus production in areas like China and India where the company can achieve economies of scale and save on shipping cost for the parts and components.
In the Philippines, Fleet said, Ford had to import a lot of parts from other Southeast Asian countries. While the company is able to achieve the required 40-percent Asean content so its Philippine-made vehicles could avail themselves of the preferential treatment in intra-Asean trade, the shipping cost pads the bill a lot.
“We ship in a lot of parts from other countries and it puts you at a disadvantage,” he added.
Fleet made it clear that the decision has nothing to do with any government policy or lack of support to the auto industry in the country.
Randy Krieger, Ford Group Philippines president, said the company initially made a comprehensive assessment if the Philippine plant could still be salvaged by allocating another model for manufacturing here. But after considering all the models in Ford’s global family and considering different scenarios in which both export operations and domestic market sales were considered, the company failed to find a viable new product program for the Philippines.
“This is a very difficult decision. The company studied every possible scenario and opportunity, but we could not make a strong enough business case for future manufacturing,” Krieger added.
This is the second time that Ford decided to cease vehicle assembly operations in the Philippines, with the first being in the 1970s. It again started manufacturing operations in the country in 1999, and assembled the Ford Lynx, Ford Ranger, Mazda3, Mazda Tribute, Ford Focus and Ford Escape here.
The Santa Rosa plant produced about 130,000 units over that 13-year period, with about 80,000 of them exported to Asean markets.
Krieger said it is difficult to maintain a small production operation that is running only at about 25 percent of its capacity.
Trade Undersecretary and Board of Investments (BOI) Managing Head Adrian S. Cristobal said the announcement of Ford was no longer a surprise since the company has been scaling down its production in the country.
“They informed us last year of their restructuring. They were making three models here and then trimmed it down to two and then now they are only making the Ford Escape up to December. It is purely a corporate decision and I’m sure this will not have any impact on the country’s investment promotions campaign,” Cristobal told the BusinessMirror.
The Ford Escape only represents about 10 percent of Ford’s sales in the Philippines.
Cristobal recognized that the country indeed does not have a good parts supplier base, although he said this is being addressed in line with the implementation of the Motor Vehicle Industry Roadmap.
Cristobal said they have asked Ford to present to the government its transition program and how it will deal with its 250 employees at the plant.
Fleet said not all of the 250 employees will become jobless by 2013 since some will be absorbed by Ford for its expanding national sales team and dealer network, and also for its units in other countries. –MAX V. DE LEON / REPORTER, Businessmirror
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