Ford expanding manufacturing in Africa to tap into new markets
Ford Motor Co. plans to expand its manufacturing plants in Africa, where the automaker is introducing models like the Mustang sports car and forecasts industrywide sales will grow 40 percent by 2020.
“Everything is pointing toward a surge in the African economy,” Jim Benintende, Ford’s head of operations in the Middle East and Africa, said in an interview Monday on the eve of the U.S. Africa-Business Forum in Washington. “We’re really focused on this region like never before.”
Ford’s increased focus on the region mirrors that of other major U.S. corporations such as General Electric Co., which Monday announced plans to invest $2 billion in the region by 2018 and double its workforce there. The summit is aimed at boosting economic ties to help nurture growth in the continent that boasts the world’s lowest income and, according to the African Development Bank Group, the fastest growth.
Benintende, a Ford veteran appointed to run the regional operation this year, is formulating an Africa growth strategy for Mark Fields, who took over as chief executive July 1 after Alan Mulally retired. The plan is to increase Ford’s factories in Africa beyond its two plants in South Africa, with Nigeria being considered as an option, Benintende said.
“Mark is the one leading the charge, saying, ‘Tell me what I need to do for you to make this all work,’” Benintende said. “He’s fully engaged.”
Africa’s vehicle market is accelerating rapidly. Ford, the second-largest U.S. automaker, projects that industrywide sales will grow to 2.1 million vehicles over the next six years, from 1.5 million in 2013. Africa’s driving-age population is projected to soar 55 percent to 840 million people by 2023, from 540 million last year, Ford has said.
The continent remains a difficult place to do business, Benintende said, citing the Ebola outbreak in Liberia and Sierra Leone and civil unrest in Nigeria, where Boko Haram rebels have been fighting security forces in a bid to impose Islamic law.
“It’s going to be a rocky road for a bit of time,” Benintende said. “But you’ve got to take the long-term view in places like Nigeria. It’s the biggest economy in Africa. You can’t ignore that. It’s got abundant natural resources, it’s got a burgeoning middle class. There’s a lot of real good reasons to look at Nigeria for future investment.”
Benintende is touring the continent to explore Ford’s options in the region. He said he expects to submit a proposal to Fields next year with a detailed plan on how many factories and dealerships the automaker needs to add.
“We need to put Ford people on the ground, close to our customers,” Benintende said. “We can’t operate from an ivory tower.”
Ford, based in Dearborn, Michigan, is debuting 17 new models in South Africa and sub-Saharan Africa over the next two years, including right-hand-drive versions of the Mustang, Fusion sedan and Focus small car. The automaker also is expanding its African dealer network.
“A lot of these nations are really coming up,” Benintende said. “If they can get together, I think it will be a tremendous economic force in the future.”
Benintende is meeting with government and business leaders at the U.S.-Africa Business Forum. Tuesday’s event, hosted by Bloomberg Philanthropies and the U.S. Commerce Department, will give business and national leaders an opportunity to discuss investment and the continent’s economy.
Bloomberg Philanthropies is led by Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.
Ford is already benefiting from adding five new models to its South Africa lineup last year. Sales in that country are up 21 percent so far this year, to 37,598 cars and trucks. Last year, Ford’s sales rose 40 percent in South Africa.
The automaker’s market share in the country, where annual industrywide sales are about 600,000 vehicles, rose to more than 10 percent last year from 7.7 percent in 2012. Through mid-June, Ford had 11.5 percent of the market, trailing Toyota Motor Corp. and Volkswagen AG. In 2010, Ford ranked sixth in sales.
The company has invested about $500 million in South Africa since 2010 to begin production of its Ranger compact pickup and Duratorq diesel engine. Ford builds the Ranger at an assembly plant in Pretoria, which it exports to 148 markets, and manufactures engines at a factory in Port Elizabeth. In total, it employs about 3,200 people in the country.
“Since 2005, we’ve exported $9 billion worth of vehicles and parts out of South Africa to the rest of the world,” Benintende said. “We can see our business improving in Africa. So we want to be there.”
In the Middle East and Africa, Ford reported a pretax profit of $77 million for the first half of the year, up 28 percent from a year earlier. The region accounted for about 2.5 percent of the company’s worldwide automotive pretax profit of $3.09 billion in the period.
Ford has said it created the Middle East and Africa business unit this year to increase focus on an “important growth region.” It expects the business to break even this year.