Ford Vietnam has just announced an additional investment of $10 million to expand its manufacturing activities, after over 10 years in Vietnam. VIR's Hoang Nam talks with Ford ASEAN president Dave Alden about the decision.

Mr Dave Alden

What prompted such a significant investment in Vietnam at this point when some other foreign-invested manufacturers are focusing on their completely built unit (CBU) sales?

The new investment underscores Ford’s commitment to developing and implementing an aggressive growth strategy in Vietnam. Ford Vietnam’s top priority is to expand and optimise our local market investment by increasing capacity to build high-quality and high-value vehicles for Vietnam consumers.

Ford Vietnam invested $102 million 10 years ago, but its first new investment is only 10 million?

We design our activities in a dynamic way, so that we can always expand according to needs. Ford’s business strategy is to approach step-by-step. Ten years ago, Ford Vietnam’s investment sum was the biggest among car manufacturing projects in Vietnam. The additional investment of $10 million will raise Ford Vietnam’s production capacity by 35 per cent, which we believe is enough to accommodate the market’s demands.

Will Ford Vietnam continue to invest knowing that taxes imposed on imported CBU cars and components can keep rising?

Yes, we will keep investing as we are confident in the mid and long-term plans of not only Vietnam automobile industry, but Vietnam’s economy. There are usually two main points that affect the decision of expanding business activities, being economic growth and consumer confidence. In the last five years, Vietnam’s economic growth has been continuously impressive. The lowering of consumer confidence in 2006 and 2007 was due to changes in tax policy, not in consuming behaviour. But, tax is not everything in buying a car.

Will $10 million be enough for Ford’s growth in Vietnam and how will this investment be used?

We have already started to use this investment and the expanded manufacturing activities will be fully functional from late June 2008. In the short term, this is enough. Ford Motor’s regional office in Thailand, which is very close geographically with Vietnam, can quickly make other necessary decisions if required.
Does the investment expansion plan involve attracting other enterprises to invest in manufacturing components?

That is one of the priorities everywhere and in the ASEAN region specifically. Ford does not just invest in a country, but also looks to develop a network of its own component suppliers. In Vietnam, we have been working very hard to ensure that our local component suppliers can supply not only to our factory in Hai Duong, but to other Ford’s factories in the region.

Recently, Ford was very successful in developing a component supplier, Harada in Dong Nai, to meet all the standards required to supply for Ford’s worldwide system. We will continue to develop more local suppliers to improve the localisation rate for our products. Localisation is already adding value, but the small scale of the market is a hurdle if we want to localise more quickly. All of our decisions are based on economies of scale.

How many official component suppliers does Ford have?
We have 14 local suppliers for the Everest model.

How well is Ford selling?

In the first quarter of 2008, we sold 2,200 vehicles. We have received orders of 1,300 Everest-model vehicles and 2,000 Transit-model vehicles for the next two months. It is still hard to forecast the situation of the later half of 2008, as the world economy is now very unpredictable and the Vietnamese Government is still implementing policies to stabilise the macro economy.

But with Ford’s current status, we can adjust quickly to reach our business targets in virtually any circumstance.

You spoke about the need for a stabilising policy so that investors can be more proactive. Do you suppose the “stabilising period” to be six months or one, five or 10 years?

When we invest in assembling main components, we need seven to 10 years to realise the effects.
The investment amount that Ford put into Vietnam is substantial, so we need a reasonable amount of time to realise profit, and that time should probably be 10 years. We are also actively working with the government to make sure that our proposals are considered.