Struggling US carmaker Ford Motor Co yesterday said it will nearly double its sourcing of auto parts this year in China, the firm's fastest-growing major market.

 

Bill Ford, the Detroit-based group's chairman, said yesterday in Beijing that the company expects to purchase China-made parts worth between US$2.5 billion and US$3 billion this year.

 

The volume is up from US$1.6 billion to US$1.7 billion in parts purchased from China last year.

 

The parts will be used by Ford's plants in other Asian nations, as well in the United States and Europe.

 

"We are only scratching in surface in China, but we have made significant progress," said Bill Ford, great-grandson of the company's founder Henry Ford.

 

"It's China, it's ASEAN (the Association of Southeast Asian Nations), it's India, really the whole Asia region is growing important to us in terms of our global sourcing strategy," he said.

 

Sourcing of cheap parts in China and Asia is becoming an increasingly important means for the loss-ridden group to cut its costs. Ford recently posted third-quarter losses of US$5.8 billion, mainly due to sagging sales in the United States.

 

The company's parts purchases in the entire Asia-Pacific region stand at some US$9 billion a year, said Mark Schulz, head of Ford's international operations. Globally, its parts purchases are worth US$80 billion to US$90 billion annually.

 

Ford now has more than 100 first-tier parts suppliers in China, according to Ford Motor China spokesman Kenneth Hsu.

 

Most global automakers are increasing the sourcing of parts in China, taking advantage of the nation's lower costs.

 

Volkswagen said in February that it would purchase auto parts worth US$1 billion from China this year, a tenfold increase from 2005.

 

DaimlerChrysler said in June that it would increase its sourcing of China-made parts to US$840 million in 2008 from US$100 million planned for this year.

 

Encouraged by growing overseas demand, Chinese auto parts manufacturers are striving to boost their exports.

 

According to a five-year government plan, China's exports of parts are expected to reach US$35 billion to US$40 billion a year by 2010, up from last year's US$10.9 billion.

 

However, industry analysts said domestic manufacturers should invest more in research and development and improve quality, instead of waging price wars in overseas markets.

 

Ford, a latecomer to the Chinese market, has invested more than US$1 billion in the nation since 2003.

 

Combined sales of Ford and its wholly-owned brands - Volvo, Lincoln, Land Rover and Jaguar - in China more than doubled to 114,685 in the first three quarters of this year.

 

But this volume is much smaller than market leaders General Motors (GM) and Volkswagen.

 

GM and Volkswagen sold 645,680 and 524,558 vehicles in China from January to September.

 

Meanwhile, total sales of China-made vehicles jumped by a quarter to 5.17 million units. Sales for the whole year are forecast to reach 7 million units, which will enable China to surpass Japan as the world's No 2 vehicle market.

 

(China Daily October 27, 2006)