In Leap of Faith, Ford Opens Assembly Plant in Vietnam
It’s a long, winding, narrow, barely paved road that leads to Ford Motor Co.’s ambitious $100-million assembly plant just outside the Vietnamese capital of Hanoi.
The road isn’t much smoother for the company as a whole as it moves into Vietnam.
Banking on the government’s will and ability to fix the country’s crumbling and dated road network, and elevate personal incomes to make private car ownership plausible, Ford has become the latest foreign auto manufacturer to make inroads in Vietnam.
“With 76 million people, Vietnam obviously has great potential for an auto maker which is prepared to respond to the [country’s] needs,” Ford Vice Chairman Wayne Booker told reporters Thursday at a ceremony to open the Hai Duong assembly plant.
However, most of those 76 million people earn between $150 and $500 a year. Ford is vying for a share of a minuscule annual market of 5,000 new vehicles that is carved up among 14 foreign auto makers licensed to operate in Vietnam.
It’s a gamble that Ford says it is willing to make over the long haul, but a bet that top competitor Chrysler wasn’t willing to make.
Chrysler last year pulled out of a $192-million manufacturing factory near southern Vietnam’s hub, Ho Chi Minh City.
South Korea’s Hyundai Motor Co., which has applied for a license to set up a $220-million plant in the same area, told Reuters last month it would reexamine its plans.
“Henry Ford put the whole world on the wheel,” said Vice Minister of Industry Nguyen Xuan Chuan. “We hope Ford Vietnam will help put Vietnam on the wheel.”
Chuan has come under fire recently, even in the tightly controlled domestic media, for supporting the licensing of 14 foreign automobile ventures in a country where fewer than 21,000 vehicles were sold last year.
Ford’s new plant, about 35 miles east of Hanoi, has the capacity to produce 14,000 vehicles a year, which is equivalent to about two-thirds of the nationwide market. Ford will make about 350 vehicles in 1997 and 1,200 next year, said Terry de Jonckheere, Ford’s executive director for new market development.
“We can’t say what the market is going to be,” said Ford Asia regional executive Ken Brown. “It’s a leap of faith.”
Set amid shimmering rice paddies, Ford’s concrete and glass factory is an oasis of high-tech innovation in rural Vietnam. The plant is to provide 200 jobs.
Ford Vietnam’s Hai Duong plant is a joint venture with state-owned Song Cong Diesel.
Ford will start with its Trader commercial truck and follow up with its Transit minibus before the end of the year. Cars will come later.
With more than 20,000 used vehicles coming into the market last year, the foreign joint ventures in Vietnam sold only 5,500 among them.
Booker also urged the government to check imports of used vehicles.
“Vietnam has historically satisfied much of its vehicle needs by importing used vehicles from other nations in the region,” Booker said.
“Left unchecked, this used-vehicle influx could stifle a new-vehicle industry,” he said.
Ford’s first task will be to raise the company’s profile against an array of more established competitors.
With Japan’s Toyota Motor Corp.’s venture joining the fray last month, and now Ford, slices of the pie are getting smaller, especially since demand for new vehicles has been hit by slowing economic growth and spending cuts by government agencies.
In the meantime, just getting to the Hai Duong factory, along dusty, single-lane Highway 5, may be challenge enough. The Ford vehicles that roll off the Hai Duong plant floor will be competing against bicycles, motorbikes, ox carts and lumbering Soviet-made trucks that choke the narrow road.
