Case Study: Joint Venture Expansion in Chongqing

Southeast Michigan is Ford’s largest global manufacturing region. Halfway around the world, in the southwest Chinese city of Chongqing, sits our second largest, where we are undergoing our most rapid expansion in a half century, bringing together our best technology and manufacturing know-how to serve one of the world’s fastest-growing markets for automobiles.

Our joint venture CAF already operates two passenger-car assembly plants in Chongqing. CAF has two more assembly plants under construction – Chongqing 3 and Hangzhou – and two powertrain plants under construction, including an engine and transmission plant.

CAF is investing approximately $600 million to build the Chongqing 3 assembly plant as we ramp up production capacity to meet demand in the world’s largest auto market. Chongqing 3 will be able to produce 300,000 vehicles annually – the first of which is expected to roll off the line in 2014. Once Chongqing 3 comes online, the Chongqing region will be able to produce a total of 870,000 Ford vehicles each year.

China represents a huge opportunity for our Company. We plan to introduce 15 new vehicles and 20 new engines and transmissions in China by 2015 as part of our plan to broaden our product portfolio and powertrain offerings. The first of these 15 new products is the all-new Ford Focus, which is produced at the Chongqing 2 facility.

Using what we’ve learned about the benefits of flexible manufacturing at our full range of assembly plants, the production line at Chongqing 2, which opened in February 2012, is designed for maximum adaptability, enabling it to produce six different types of vehicles. This allows Ford to bring new vehicles to market faster and to test out the assembly of new vehicles while maintaining full production speed for existing vehicles. Chongqing 3, meanwhile, will have the flexibility to build up to seven different vehicle models.

As part of our growing sport utility, or crossover, vehicle lineup in China, Chongqing will produce the all-new EcoSport and all-new Kuga, both of which were showcased at auto shows in China in 2012. We also recently brought the Ford Explorer to China. These three SUVs (plus the popular Ford Edge, which is already available in China) appeal to Chinese consumers by offering versatility and practicality. Together with the Fiesta, Focus, Mondeo and S-MAX, these SUVs offer a complete range of Ford’s high-quality, fuel-efficient and safe passenger vehicles with smart technologies and driving dynamics that Chinese consumers want and value.

The Chongqing plants use advanced and environmentally friendly technologies that dramatically cut water, chemical and electricity usage, and significantly reduce carbon emissions. (Ford was the first automaker in China to voluntarily disclose plant-level greenhouse gas emissions.) The plants incorporate best practices to ensure that high-quality vehicles are produced efficiently and with reduced environmental impact.

In Chongqing 2, for example, state-of-the-art technologies are reaping big rewards. By implementing energy-saving equipment throughout the plant, we’re able to save 58 million kilowatt hours a year. That’s enough to power almost 20,000 households in a major Chinese city for a year. A variety of more-efficient water technologies allows the plant to recycle 61,000 cubic meters of water a year – enough to fill 24 Olympic-sized swimming pools.

The plants in Chongqing also incorporate Ford’s global manufacturing operating system, designed to improve efficiencies, increase capacity utilization and make our Company an industry leader in lowest total cost production.

As we bring on new facilities, such as Chongqing 3, we are expanding the use of common manufacturing processes and standard systems for tracking material, delivery, maintenance and environmental management so that new and existing plants are aligned in how they operate. We are also making broader use of virtual tools that reduce the cost of new plants and improve the efficiencies of new model changeovers.

Chongqing isn’t our only focus in China. Also in 2012, Ford and our joint venture broke ground on a new passenger vehicle assembly plant in Hangzhou. The joint venture is investing $760 million in the new plant, bringing Ford’s total investment in China to approximately $4.9 billion since 1995. Total annual vehicle capacity for CAF will be more than 1.2 million units in 2015.