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cover story 4 @Ford APA March/April 2011 Building the Future of Ford Brand new plants are under construction at Rayong in Thailand and Chongqing in China, while existing facilities in India, South Africa and elsewhere in the region have been massively expanded in recent years. With more projects in the pipeline, the APA building boom shows no sign of slowing down. LOCATION, LOCATION, LOCATION A new plant is an investment running to hundreds of millions of dollars, and the choice of where to build it is a monumental decision that will have consequences for decades to come. Steve Day, the APA manufacturing director, has been involved in constructing some of the biggest auto plants in the region, and is one of the people who help narrow down where to build – from which part of the region, to which country, to which province or specific site within that country. “A lot depends on demand – we build where we sell, or where we can benefit from countries being part of something like the ASEAN Free Trade Area, or the free trade agreement between South Africa and the European Union,” he said. “We want to pick a market that has a good supply base, labour force, construction environment and infrastructure – we look at the factors that will help us deliver the best quality product at the best cost in that region.” He said the Ford Thailand Manufacturing (FTM) plant currently under construction in Rayong offered a good example of a site that ticked all the boxes in terms of location. The future of Ford is being built in Asia Pacific and Africa (APA), one brick at a time. Car sales in the region are expected to keep growing for years to come, and Ford is rapidly expanding its APA manufacturing operations to keep up with demand “Thailand’s a good hub, with good infrastructure, and we already have the joint venture AAT plant there; it also has free trade agreements with Australia and ASEAN, so it was an obvious location for that plant,” he said. “Once you’ve picked the country, you then have to go and find the best deal for land; sites suitable for a plant this size are actually few and far between, and you need somewhere with good logistics infrastructure, where it’s easy to have raw material coming in and finished goods going out, whether that’s to elsewhere in the country or for export abroad.” Another factor that can help narrow down the choice of where to site a new plant is whether national or local governments are able to offer investment incentives. New manufacturing sites can have an incredible economic impact on a region in terms of investment and jobs, especially automotive assembly plants, which bring other factories to feed the supply chain. “It varies hugely from country to country as well as between cities and states within a country – in Thailand, for example, there are national-level incentives available to companies investing in certain locations, but individual cities don’t really have the power to offer unique incentives or compete against one another, and the ability to negotiate special deals is limited,” said Gregory Daniels, director, APA tax. “At the other end of the spectrum is China, where many of the previous national incentives aimed at attracting foreign investment are being eliminated in a heavily debated attempt to level the
playing field between foreign and domestic firms. However, local governments have room to negotiate customised deals case by case. India is just about in the middle – there are some national policies but you can also negotiate across the different cities and states.” The types of incentives available include lump sum investment grants to help with construction costs, preferential land policies and locations, training grants, fixed term “tax holidays”, and other financial incentives tied to the level of government revenues generated as a result of the investment. “This latter form of incentive is growing in popularity with governments because it’s essentially revenue neutral on the margin – they’re not just handing over a cheque and hoping it creates jobs and revenue,” he said. “Typically the decision on where to build is driven by the manufacturing footprint, but investment incentives are clearly an important variable.” SAFETY FIRST Construction methods and skills might vary from country to country, but adhering to Ford’s strict safety standards is paramount on every project. “Local building codes and safety procedures do vary from place to place, but we have a very strict safety culture that we apply to all of our projects, wherever they are,” said Trevor Negus, manufacturing director for the Ford Thailand Manufacturing project. “The companies we have worked with on construction projects are global and highly professional businesses that understand the importance of ensuring that they and their sub-contractors are following Ford’s global safety procedures. They know that our expectation at Ford is not just to meet local standards but also our own, global safety standards, which often exceed what’s required locally, and they know how to achieve that with local contractors.” cover story @Ford APA March/April 2011 5
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Ford APA

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