Ford’s light commercial vehicle joint venture in China will expand into heavy trucks through a major acquisition, with the two partners saying the move will give it “a strong foothold in the world’s largest market for the segment”.
The Detroit automaker holds a 30% stake in Jiangling Motors Corporation (JMC), which currently manufactures light commercial vehicles and SUVs, including, since 1995, the Ford Transit light van and truck line. JMC sold over 190,000 vehicles in 2011, for revenue of CNY17.5bn (US$2.7bn).
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JMC will buy 100% of Taiyuan Changan Heavy Truck Company, subject to approvals from relevant Chinese government authorities.
“JMC’s acquisition represents a great opportunity to continue to expand the breadth of our business in China across vehicle segments,” said Ford Motor China chairman and CEO Dave Schoch. “A strong heavy truck operation like Taiyuan will complement Ford’s existing passenger car and light commercial vehicle operations here in the world’s largest and fastest growing vehicle market.”
Ford’s ambitious growth plans in China – where it was relatively late establishing joint ventures in comparison to Detroit-based compatriots General Motors and Chrysler, include 15 new vehicles and 20 new powertrains by 2015. The automaker and local partners – for cars Chongqing Changan Automobile and Mazda – are building five new plants including a new $300m factory in Nanchang where JMC is based, with an annual capacity of 300,000 units.
When the facility comes online in 2013, it will produce both JMC and Ford brand vehicles. To date, Ford has spent $4.9bn in China which it expects will be key engine to its global growth.
“Being a major shareholder of JMC, Ford is delighted to witness JMC’s rapid development and business expansion in the commercial vehicle market,” added Schoch. “Ford has enormous experience and world-class products and technologies, including in the heavy truck business, which can be deployed to support JMC after the acquisition.”
Schoch, who is also vice chairman of JMC, was among government officials and executives at a signing ceremony on Wednesday (8 August) in Taiyuan, the capital of Shanxi province, to commemorate the acquisition agreement.
As part of the agreement, JMC will pay cash for the 80% stake in Taiyuan Changan Heavy Truck currently held by China Changan Automobile and the 20% holding of China South Industries Group Corporation.
Upon completion of the deal, Taiyuan Heavy Truck will become a wholly-owned subsidiary of JMC.
Ford noted Shanxi province provides a significant launch pad for JMC’s foray into the heavy truck business where heavy trucks are in strong demand thanks to the region’s wealth of raw materials and energy resources such as iron, coal and electricity.
“With Ford’s support, Jiangling will quickly introduce new products and improve Taiyuan’s existing products in order to bolster the competiveness of Taiyuan Heavy Truck,” said Schoch.
Demand for heavy duty trucks is expected to continue to pick up steadily given China’s long-term economic growth potential and strong investments in infrastructure by the Chinese government. China is the world’s largest market for heavy trucks, with nearly 1m units sold last year – more than North America, Europe and South America combined.
