APA - @Ford Online recently spoke with Joe Hinrichs, Ford group vice president and president, Asia Pacific and Africa, regarding the opportunities and challenges facing Ford Motor Company as well as the industry in the APA region. Below is an excerpt from that discussion.
Q: Why is Asia Pacific and Africa so important to Ford right now?
A: I think Asia Pacific and Africa are important to Ford right now for several reasons. First off, it’s where most of the growth is occurring in the industry. And as a global player, we want to make sure that we have a balanced portfolio around the world.
The second reason it’s so important is because we’re competing now with companies from Japan and Korea…and in the future we’ll be competing with companies from China, India, etc., and we need to have a presence there and understand the cost base and the methodologies used to deliver the products as well as the customers that are there.
The third reason is simply that by 2020, some estimates are that half of the world’s volume could be coming from this region of the world. So again, if you want scale, if you want to have the global presence necessary to be a large player like we are, it’s very important.
The last thing I would say is with the One Ford strategy and global platforms, the growth that’s occurring in APA is helping to fund products around the world. And conversely the ability of the other regions to help support our growth all works in concert together. So when we do a global platform vehicle, we all share in the costs…and the growing role that APA is playing helps pay for more and more of the costs of developing a vehicle so that all the regions of the world can afford more new vehicles as well as more freshening to vehicles.
Q: There has been a lot of change in the global industry mix from 2000 to 2010 and more projected from 2010 to 2020. Can you discuss that growth?
A: What’s happened is that markets like China, which last year was a quarter of the world’s market, are continuing to grow and at such a large scale. Other markets like India, Thailand, Malaysia, Indonesia, etc. are also growing at very fast rates. So what you’re seeing is 20 years ago or even 10 years ago the vast majority of the world’s volume was coming from North America and Europe. But what’s happening in the future is that 40 to 50 percent of the volume is going to come from places like China, India, Thailand, and Indonesia. So you need to have a presence there and you also need to be able to compete there.
There’s also a school of thought that believes that eventually when these markets and these industries reach significant size, they’ll also want to export to other markets. So that’s another dynamic that’s going to play out over time. But the most important thing is just where the growth is. For Ford, with the strategy of profitable growth for all, and growth occurring in all regions of the world, but most dramatically, from a volume standpoint, in Asia Pacific.
Q: Seeing the amount of growth in the APA region from 2000 to 2010, why did it take so long for Ford to get in the game?
A: I think the reality is that in the last decade we had a lot of other things to focus on. If you go back to the end of the 1990s, we were really working hard to restructure our European business, which has been very successful for us over the last decade. We also spent a large amount of effort restructuring our South American business, which has been a very profitable business for us over the last many years. And we also bought all those brands – Jaguar, Land Rover, Aston Martin, Volvo – and then of course during the last several years we’ve been selling off all those brands. In the middle of all of that, we’ve been dealing with the restructuring of North America.
And so when you look at it, we only had so much energy, time and capital to focus on so many things. So we went through that cycle and now we come out here in 2010-2011 as a much stronger company after the global financial crisis…and we have the capital, but more importantly, under One Ford, we have the global platforms and the global structure to be able to compete in that part of the world. Before, we were using products primarily from Europe, which were at a higher price point, with a lot of feature content. They were great vehicles, but they didn’t really meet the needs of customers in China and India, who were at a lower price point as first-time buyers. Now, with our global strategy we can use the same platform and develop all kinds of iterations of products and top hats to compete successfully.
So I’d say one, the structure now is ready for the world with our global platforms. And two, we’ve come out of all this global restructuring as a much stronger company so we now can focus our capital, our management resources and our attention and time on growth in APA.
Q: Are there any benefits to coming into the region later rather than earlier?
A: I think the biggest advantage we have is that one, we can see what our competitors have done – what’s worked and what hasn’t worked. And secondly, we can also take advantage of our scale in a way we probably couldn’t have five years ago because we weren’t ready. With the global platforms and the global structure we have now with our business and with all the skill teams supporting the CBGs, we have the ability to do things from a product, manufacturing, purchasing standpoint that we didn’t have in our system five years ago. Now, we’re talking about developing product and launching new plants and working with the supply base and we’re doing that on a global scale, not some little region of the world that didn’t have the scale and size to be able to do that. So we’re ready now. You always like to go faster and start five years earlier with most everything in life, but the opportunity we have now is to bring the power of Ford globally to these markets, get our fair share of every segment we compete in and watch our business grow as it has been over the last 18 months.
Q: You mentioned the global product strategy and the ability to offer different top hats. Can you explain how that works – tailoring global vehicles for specific markets?
A: What we’re doing now is focusing on all the new global products in the B-segment, like Fiesta, and in the C-segment, like the Focus, which are being developed with the definite intention of selling to markets like China, India, Thailand, etc. So the program teams who are also working on making sure those vehicles are well suited for Europe, U.S., Brazil, etc. are taking into account the Chinese consumer or the Indian consumer. And we’re doing research in those markets. As the vehicle is developed, all those inputs from around the world go into the program team to make sure the product is competitive in all those major markets of the world. Then we research it. Now there may be little things we do here and there – some of the materials, some of the colors, like in India much more vibrant colors, we may make a few changes to the front end a little bit to make it more suitable to some of the tastes – but by and large the vehicle is the same vehicle around the world.
But what it also allows us to do is say, well maybe in Europe, the high-end series of the Focus or in North America the high-end series of the Focus is where the great volume opportunity is, but in the markets in Asia maybe the lower price point Focus. So maybe technology and features that we’re adding to these vehicles to make them wonderfully competitive in our mature markets aren’t necessary. So we can change the feature content a little bit, adjust the price point a little bit, still offer great styling and great safety and all the great attributes from a quality standpoint that you would want from a Ford, but be able to offer them in slightly different variations in each market. I think that’s very important.
The other thing that we’re also doing is we’re taking what we’ve learned from the Figo in India and our value-enabled strategies and we’re developing value-priced products that are smaller, at lower prices than some of our higher content…but in the same kind of product like the Fiesta or Focus. So we’ll have the opportunity to compete on both ends of the scale in some of these segments. We’ll have a higher-end product and lower price point which still has the Ford DNA in it and that will create a great volume opportunity.
Q: What are Ford’s plans for growing share with new products developed for markets in APA?
A: The growth is all about taking advantage of the One Ford global platform strategy and bringing more products to the market. Our opportunity to grow our market share in places like China, India and ASEAN is all about increasing the portfolio of vehicles that we sell. When you only sell three or five vehicles in a market you’re not going to have sizable market share. So we have a plan over the next four years to really launch a significant number of vehicles, build a large number of plants, add capacity and dealers, etc. to grow the business. And we’re going to grow the business by each product being successful in its market each time we launch it, like the Figo in India, like the Fiesta in the ASEAN markets, like the Focus and Fiesta are in China for example. So as we launch new products like the new Focus and the new Ranger, those new products will get their fair share of the segment, which is higher than our average share and that helps grow the market share. And then as you add more new products, as long as each product gets its fair share of the segment, you’re adding to your market share.
And the most important thing for people to remember in all this is that in most of these countries, these are first-time buyers that we’re talking about. So they’re not like mature markets where you basically have a customer that has bought a vehicle from some other competitor over the course of several purchases. These buyers haven’t bought from anybody before so we’re competing with all the other manufacturers on the same scale. As long as our products are competitive and they will be – we’ve got great quality and a strong brand – we’re going to get our fair share of those new buyers. We just need to have more products for them to choose from at lower price points to be able to get the volume. And that’s the plan.
Q: What do you want employees to know and recognize about APA and why it’s important?
A: I would say first off that we have a wonderful opportunity to continue with the legacy of Ford, which is again allowing the multitude of the masses of the people to be able to purchase a vehicle for the first time, to open up the highways and the freedom of transportation that comes with it. It’s our legacy. It’s what Henry Ford started. And so this is the Ford DNA. It’s a wonderful opportunity for us. This is where the largest growth is occurring in the auto industry and it’s occurring on a scale that no one has seen before and no one will ever see again because there’s only one China and one India. So this is a unique opportunity in time with explosive growth occurring.
I would also say that this is where future competition is going to come from so we need to know how to compete. We need to know the manufacturers in these countries very well. But we have a wonderful opportunity to take advantage of the work we’ve done over the last several years under One Ford and continue to hone our global competitiveness…with the skill teams ready to really showcase that we can compete with everybody around the world, in all markets,, especially in Asia Pacific.
And lastly, it’s a wonderful opportunity to grow and learn about what’s happening in what is the largest population base of the world. And as people in places like China and India reach middle-class status in their own country, they want transportation. They want the freedom and they want a vehicle that’s competitive internationally and we can offer that to them. This is an exciting time and so for us – with three assembly plants under construction, an engine plant under construction, a transmission plant under construction and probably more to come – this is a unique opportunity. In the auto industry, this is the decade of Asia Pacific. It doesn’t minimize the importance of all the other markets around the world. It’s just that everyone around the world is focused on the growth opportunity that exists in places like China and India and we, as a strong global player and competitor, need to be there and be successful as well.