Jun 24, 2005: Ford to Invest $30M in Output

By Anna Smolchenko
STAFF WRITER

Ford will sink another $30 million in Russia to more than double its production output by January next year, the company‘s top European executive said Thursday.

The U.S. automotive giant said it would boost the capacity at its Vsevolozhsk plant, near St. Petersburg, from 25,000 Focus models to 60,000, responding to its "great success" with Russia‘s increasingly choosy motorists.

"To meet the demand, we will have the annual plant capacity increased to 60,000 a year by January 2006," John Fleming, president of Ford Europe told a news conference Thursday.

Ford has so far invested $200 million in its Russian facility, which it opened in 2002. The St. Petersburg plant is Ford‘s only factory in the world producing the Focus model in all four body styles: three- and five-door hatchbacks, sedans and station wagons, the company said.

The company‘s next expansion step in Russia comes at a time when Ford is facing a sales decline and laying off thousands of employees in North America.

Last week, Vedomosti daily reported that Ford‘s Russian plant - the country‘s first automotive facility by a foreign automaker - was not turning a profit due to low output, among other things.

Ford declined to discuss its financial performance. Analysts welcomed the move but warned that more Focus components should be produced locally.

Denis Nushtayev, an analyst with Metropol investment bank, admitted that Ford might be increasing capacity with the hope of finally creating profit. "But before they increase a local content [of components] to 50 percent to 60 percent, things are unlikely to change," he said.

As of today, up to 30 percent of components for Ford‘s plant are locally produced by Russian and European suppliers who followed Ford to St. Petersburg, said Fleming.

With more than 28,000 Focus models sold last year in the country, Russia was ranked No. 5 in Europe by the volume of Focus sales, said Henrik Nenzen, president for Russian and CIS operations at Ford.