An automobile assembly line at a Ford Motor Co factory in Nanjing. The company aims to boost its presence in the Chinese market and increase global sales by 50 percent in four years. [Photo / China Daily]

US automaker adds production facility in the southwest of the country

SOUTHFIELD, Michigan - Ford Motor Co broke ground on Thursday on a $500 million engine factory in Southwest China as the automaker seeks to expand in the world's largest market and boost global sales by 50 percent in four years.

The plant in the Southwestern Chinese city of Chongqing will more than double engine capacity for joint venture Changan Ford Mazda Automobile Co to 750,000 units when output starts in 2013, according to its statement. Ford forecast last week that growth in Asia will help boost global sales by 50 percent to 8 million vehicles a year by 2015.

Chief Executive Officer Alan Mulally expects 55 percent of vehicle sales will be small cars and a third will be in Asia by 2020. Ford, which still gets most of its sales and profit from the United States and Europe, holds a 2.4 percent share of the passenger-vehicle market in China, trailing General Motors Co's 10 percent, JD Power & Associates said in April.

The engines built in Chongqing will be used in Ford-branded vehicles built and sold in China, the statement said. The automaker, based in Dearborn, Michigan, plans to triple its lineup in China by offering 15 models, including the Kuga small sport-utility vehicle, by the middle of the decade, Chief Financial Officer Lewis Booth said last week.

Ford plans to double its number of dealerships in China to 680 by 2015 and is spending $1.6 billion building four factories there. By next year, the company will have the capacity to build 1.1 million vehicles in China, Jim Farley, Ford's marketing chief, said last week.

Ford also said its pretax profit will be lower in the second half than in the first six months as the company faces rising structural and commodities costs.

Second-quarter profit will equal or be "slightly lower" than in the first quarter, when Ford earned $2.78 billion before taxes, Controller Bob Shanks said on Thursday at the Deutsche Bank Global Industrials and Basic Materials Conference in Chicago. The housing recession is hurting commercial-truck sales and Ford is constrained in output of fuel-efficient cars, he said.

"Our commodity costs and our structural costs will each be up about $2 billion," Shanks said. "We expected first-quarter earnings would be potentially the best of the year. As we look at the second quarter, it could be very close to the first quarter and maybe a little lower."

New models such as the redesigned Focus compact car and Explorer sport-utility vehicle are commanding higher prices, which helped boost first-quarter net income 22 percent to $2.55 billion, the most for the period since 1998. The second-largest US automaker has earned $9.28 billion in the past two years after $30.1 billion in losses from 2006 through 2008.

Related readings:  Ford, GM, Honda see mixed China sales in May  Ford eyes India, China to hit 50% growth target  Chang'an Ford recalls Mondeos  China warns of potential steering problems of Ford's Windstar

On Wednesday, Ford fell 28 cents, or 2.1 percent, to $13.15 at 4:15 pm in New York Stock Exchange composite trading. It has declined 22 percent this year.

The automaker has said it will face $4 billion in higher expenses for commodities, new-product development, engineering, manufacturing and advertising this year. The company also said earnings from its Ford Credit finance unit will be $1.1 billion less because of changes in lease depreciation and credit-loss reserves.

Shanks said concerns about the economy are damping US auto sales. Ford expects industrywide sales to "snap back" in the year's second half and reach the automaker's forecast of 13 million to 13.5 million deliveries, he said. "Consumer confidence isn't as strong as you'd like," Shanks said. "There's just a lot of nervousness across the board on the global economy."

Bloomberg News