Sharp growth in demand in Russia is leading Ford to add more production capacity at its Saint Petersburg plant, but there are still challenges ahead for automakers looking to do more business in Russia, according to Ford of Europe’s vice-president for manufacturing.

Speaking at Automotive News Europe’s Congress in Turin, Jim Tetreault painted an upbeat picture of a growing demand in Russia and a big opportunity ahead for western carmakers. But he also cautioned that wage rates are rising fast (the unemployment rate in the St Petersburg area is under 1%) and poor infrastructure and logistics can add costs.

“The supplier industry is just starting to mature in Russia,” Tetreault told just-auto, stressing the word ‘just’.

“But logistics is a real issue in Russia,” Tetreault added. “The ring-road in St Petersburg isn’t even finished yet – the road systems are very challenging; they’re in disrepair, they don’t go to the right places; it takes a long time to get things around the country and the railroads are certainly not as reliable as in western Europe from a timing aspect.

“And on top of that there is severe port congestion in St Petersburg. It’s going to be important that we continue to partner with the government for a resolution of the issues we face.”

Nevertheless, Ford is investing in more capacity in St Petersburg.

The plant produced 75,000 Focus models in 2007, but Ford is planning on making 125,000 this year – with the additional volume split evenly between higher Focus output and the introduction of the redesigned Mondeo.

Tetreault told just-auto that Ford continually monitors rising labour costs in Russia, with options to increase automation reviewed regularly. He believes that automation at St Petersburg will rise over time.

“The entire chassis system in St Petersburg is currently built in manual operation, not by robots. And that doesn’t impact quality either. Framing welds on the other hand are automated because of the precise nature of the process.

“There is a fair bit of manual operation in our St Petersburg plant but I expect that over time that will fall, reflecting higher wage rates and the requirements of new models going in there. The Mondeo for example is less manual than the Focus because it’s a newer car with more stringent requirements – especially on the roof, which employs innovative laser welding techniques.

“I can’t say how quickly the plant will become more automated but robot prices keep coming down and wage rates keep going up. Every year we evaluate that against our internal rate of return objectives and, where it makes sense to introduce automation, that’s what we do.”

What about using St Petersburg as a Ford supply source for other markets?

“If Russia applies to the WTO and meets all the requirements, then it becomes much more feasible to move products around the former Soviet Union countries and perhaps even into Western Europe.

“But the real issue with that plant is that we can sell everything we make – and then some – in Russia and we are not at a point where we would export. There’s just too much demand in Russia.”

Dave Leggett