As a major investor in Russia’s car industry, Ford is closely monitoring the impact of the current geopolitical crisis in Ukraine and its spillover effects on Russia’s economy.
Speaking to just-auto in Geneva, Ford Europe boss Stephen Odell noted that the crisis in Ukraine has already caused economic turbulence in Russia, but stressed that Ford is taking a long-term view on its Russian investments.
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“What it’s [the crisis] doing for the Russian industry is it is clearly putting downward pressure on it,” Odell acknowledged.
“The exchange rate is extremely volatile at the moment. But it’s difficult to judge on the developments of one, two or three days.”
Odell stressed Ford’s already substantial presence in Russia and its long-term strategy there.
“From a business perspective we have a strong position in Russia. We have a joint venture – Ford-Sollers – and three plants in Russia. Most of the production is for the Russian market, minimal exports, although some of it was going to the Ukraine.
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By GlobalData“We have a long-term view that Russia will be one of if not the largest industry in Europe. It will continue to grow and we have a business model that fits that.
“We will tailor that [business model] in any we need to, the way we do everywhere else in the world,” he said.
The exchange rate is undoubtedly a concern though. Odell noted that the rouble has depreciated 12% against the euro in the last twelve months. Movements that large upset business assumptions on internationally traded parts prices. Much of the content in cars assembled in Russia is imported from Western Europe.
However, Odell is comfortable with Ford’s progress with localisation of content in Russia. As far as manufacturing localisation goes under the ‘Decree 166’ Russian government’s auto industry rules, Odell says localisation of manufacturing is proceeding on track.
“It [local content] was 35% last year and grows to 60% by 2018 alongside installed capacity of 320,000 units by then. We are on track to do that,” Odell maintains.
What about car sales in Ukraine? Besides the civil strife and turmoil on the streets, the country’s economy faces major challenges and uncertainties ahead. Ford’s exposure to that market, in terms of car sales, sounds low. Odell says it’s been running at just a few thousand sales a year for Ford.
“And most of those come out of Western Europe. Given where that market is at the moment that is clearly going to be minimal for a period of time.”
See also: GENEVA: ‘One Ford’ has kept us alive in Europe – Ford Europe chief
