Ford Reaches Agreement on Joint Venture in China : Autos: Pact, which still faces approval by government in Beijing, calls for production of vehicle components.
Ford Motor Co. said Wednesday that it had reached a tentative agreement to manufacture automotive components in China in a joint venture with a Chinese parts supplier.
The agreement between Ford and Shanghai Automotive Industry Corp. comes as trade relations between the United States and China are strained because of U.S. concerns with China’s human rights record.
Ford trails Chrysler Corp. and General Motors Corp. in gaining entry to China, which because of its sheer size is regarded as the most promising auto growth market in the coming decade.
Ford declined to put a price tag on the agreement, but a spokesman said it involved “tens of millions of dollars.” The deal must be approved by the Chinese government.
“We believe that this joint venture will be good for Ford, good for our partner and good for China,” said Alex Trotman, Ford chairman and chief executive.
The agreement, expected to be finalized in several weeks, calls for production of interior trim, seats, instrument panels and other plastic parts. The work would be done jointly by Ford’s plastics and trim unit and Shanghai’s Yan Feng division, China’s largest supplier of trim products.
Ford, which recently set up a separate China management operation, also is negotiating a joint venture to make glass, electronics, engine parts and air-conditioning components in China.
More importantly, it wants to assemble vehicles in China--something its U.S. competitors already are doing in joint ventures. Chrysler is building Jeeps in Beijing; GM is assembling pickup trucks in Shenyang.
“This agreement is an important first step,” said James Paulsen, president of Ford’s China operations. “We are hopeful it will lead to vehicle assembly operations as well.”
The Big Three also are exporting vehicles to China. In the last two years, China has spent $309 million on vehicles produced by Ford, GM and Chrysler in North America.
That trade could be threatened by the Clinton Administration’s review of China’s most-favored-nation trade status, which allows it to export goods to the United States under normal, low tariffs.
Renewal of most-favored-nation status is in jeopardy because of the Chinese government’s resistance to human rights reforms sought by the Clinton Administration.
Defiant Chinese officials have said revocation of the favorable trade status would hurt the United States more than China.
Paulsen said Ford is concerned with the trade friction but is looking at China with a long-term perspective. “If MFN is not extended, there would be some disruption,” he said. “We hope it would not be a lasting one.”