Ford Will Buy 10% Holding in Korea Car Firm
Ford Motor Co., moving aggressively to solidify its access to small cars from Asia, said Thursday that it will acquire 10% of Kia Motors Corp., a South Korean auto maker that has already agreed to start producing mini-cars for Ford by next year.
Ford officials confirmed the agreement Thursday after Kia called a special shareholders meeting for July 2 in Seoul to vote on the proposal.
Ford refused to say what its stake in Kia will cost, but it indicated that the price tag could be between $20 million and $50 million. Ford officials added that the auto maker has no plans to acquire control of Kia; they said the relatively small 10% stake was purchased simply to guarantee that Ford could have access to Kia’s small cars in the future.
“This is designed to make the relationship a little more binding than just the buyer-supplier relationship we had before,” Ford spokesman Kenneth Brown said.
But the investment also expands Ford’s growing Asian base and underscores its commitment to depend on foreign suppliers and cheap Asian labor for its small cars in the late 1980s.
Match GM, Chrysler
“Now that Ford is lined up, everyone in Detroit will have his own $2-an-hour supplier of cars and parts,” said David Healy, automotive analyst with Drexel Burnham Lambert.
Until recently, Ford had moved slowly in developing an Asian supply base for its domestic operations; by contrast, General Motors and Chrysler already sell thousands of small Japanese-made cars in the United States, and they are quickly linking up with Korean suppliers as well.
But now Ford is poised to flood its North American dealerships with “econoboxes” from all over Asia.
This fall, Ford’s Canadian subsidiary will begin importing into Canada a Japanese-designed subcompact built in Taiwan by Ford Lio Ho, a Taiwanese auto maker that is 70% owned by Ford. In 1987, Ford will import a limited number of the mini-cars from Kia, while Ford’s new Mexican assembly plant is expected to begin producing small cars designed by Mazda, its Japanese partner, for the American market either late this year or early in 1987.
To top it off, Mazda, which is 25% owned by Ford, has earmarked half of the output of its new Michigan assembly plant for Ford. That plant, now under construction, is expected to produce a sporty replacement for Ford’s Mustang beginning in 1988. Mazda, which in turn owns another 8% stake in Kia, is also designing the Kia mini-cars that will be exported to Ford.
With so many Asian subcompacts targeted for Ford’s domestic operations, industry analysts are beginning to believe that Ford has decided to give up on developing new, U.S.-built small cars.
Analysts say they expect that Ford’s Escort subcompact, currently the firm’s smallest American-built car, will slowly wither away in the face of so much internal competition from Ford’s new imports.
At the same time, Ford’s Alpha project, which the company briefly touted as its answer to GM’s Saturn small-car project, is not likely to produce any new small car, analysts say.
“Ford is not going to spend $2 billion on an all-new economy car built in the U.S.,” Healy predicted.
