Ford Intends To Buy $3 Billion China-made Components To Cut Costs

Ford Motor Co. announced earlier that it will be purchasing as much as $3 billion worth of China-made components to boost its aim to cut production costs. The purchase transaction is anticipated to take place this year.

"Ford will buy between $2.5 billion and $3 billion in auto parts in China," said William Ford Jr., chairman of the Dearborn, Michigan-based carmaker. Bill Ford explained, "We are only scratching the surface in China. China is very key to our global sourcing strategy particularly as the quality of the local suppliers' ramps up."

Analysts in the auto industry explained that the reason behind the purchase is the automaker's need for cheaper auto parts to satisfy its goal to cut costs up to $6 billion by 2010. It can be recalled that Ford experienced a slumped sales in the United States. Said plight resulted to third quarter loss amounting to $5.8 billion.

Among the 3 largest American automakers, Ford was the last to produce vehicles in China. Production took place in Chongqing city in the year 2003. Ford Fiesta parts and those of Mondeo where assembled in the territory. In that specific endeavor, the automaker invested $1.5 billion.

In 2004, Ford agreed to put up a third factory in Nanjing city, China to assemble its 8 new models. The building of the plant is done in cooperation with Mazda Motor Corp, its affiliate. That particular investment proved to be beneficial because Ford China sales more than doubled in the first three quarters of 2006. The automaker sold 114,685 vehicles via direct sales. It was approximately 2.2 percent of the 5.28 million vehicles sold in the particular period in China.

Ford shares the biggest slice of China sales with American auto giants - General Motors Corp. and DaimlerChrysler AG's Chrysler Group. General motors divulged that its 3 quarters China sales increased by 37 percent to 645,680 units. DaimlerChrysler AG, on one hand, reported perfected sale of 16,400 Mercedes-Benz luxury cars in China and Hong Kong within same period.

Experts are saying that the recovery plan of Ford has substantially contributed to the surged in sales. Nonetheless, some of the analysts noted that the automaker is moving too slow while its rivals are taking swift yet precise steps.