Ford to use India as hub for engine exports to Asia

Mumbai: Ford Motor Co. the second-largest US automaker, plans to export engines from India to the Asia-Pacific region to take advantage of cheaper production costs in the country.

Ford is spending $500 million in expanding its factory in Chennai, South India, to make 250,000 engines and 200,000 vehicles annually by 2010, Michael Boneham, managing director of the local unit said in an interview. Ford may also export a small car that it plans to produce in India, he said.

Exports of Indian-made engines, parts and other components may rise almost six-fold to $40 billion by 2015 from about $6.7 billion in 2003, as automakers seek to trim production costs, according to McKinsey & Co. Dearborn, Michigan-based Ford is expanding in Asia as rising gasoline prices erode truck sales in its home market.

"India will be a significant domestic market for us, and it will be an exporter of engines to the region," Boneham said yesterday. "It's a very cost-effective country."

Global ambition

India's vehicle exports rose 11 per cent to 276,053 in the year ended March 31, as automakers used the country as a hub to make hatchbacks and minicars for Europe and Asia, according to the Society of Indian Automobile Manufacturers.

Prime Minister Manmohan Singh's government in February cut taxes on small cars for the second time in three years to make the country a global hub for small-car production. Taxes on cars shorter than 4 meters were cut to 12 per cent from 16 per cent.

The excise tax, levied at the time of shipping from the factory, was as high as 32 per cent in 2003.

Salaries in India are cheaper too. Maruti Udyog Ltd., the nation's largest carmaker, pays factory workers about Rs26,000 ($605) a month, the company said last year.

By comparison, an entry-level worker in the US, makes about $2,300 a month, according to the United Auto Workers union website.

The expansion in India contrasts with Ford shutting plants in the US The second-largest US auto-maker yesterday said it plans to reduce salaried-employee costs by 15 per cent as declining US sales extend losses.

Ford now sells Ikon, Fiesta and Fusion cars and Endeavour sport-utility vehicle in India after setting up the unit in 1995.