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(UPDATE) MANILA, Philippines – Ford Motors on Tuesday said it has shut down local assembly of the Mazda 3 car, with production of the Focus model scheduled next for transfer to Thailand.
Officials said the company was moving production of the two models out of the Philippines because of high manufacturing costs in the country and its small market.
Edward Krieger, Ford Motor Co. Philippines chief, said the cost of building and shipping out a Focus from the Philippines was $1,500 more expensive than in Thailand.
He said the manufacturing cost gap was “too big” for the company to justify the continued export of the car model.
On top of higher production costs, the Philippines has a smaller car market and parts supply base than Thailand to warrant an investment of $450 million for a new state-of-the-art plant to churn out Focus units late this year.
The Thai investment pales in comparison to the $270 million that Ford plunked in the Philippines for the assembly of flexi-fuel engines of the car model.
Ford’s move comes as Thailand, considered Southeast Asia's Detroit, has yet to fully recover from floods that disrupted supply chains of motor vehicle assemblers and electronics makers across the region. The break in the region's supply chain led to a four percent contraction in Philippine auto sales.
Ford was the Philippines' only auto exporter, and in 2010 shipped out 9,858 units, including the Focus, to sister companies in Indonesia, Malaysia and Thailand.
The Aquino administration is no longer pursuing the Comprehensive Motor Vehicle Development Program drafted by the previous government. This as the Philippine auto industry has failed to expand its volume of CBU exports, with shipments abroad limited to parts such as wiring harness and transmissions.
Negotiating for reinstatement of fiscal perk
Krieger said the $400-per-unit incentive the Philippine government gave already expired in 2010. The company is still negotiating with the Aquino administration for the reinstatement of this fiscal perk to keep local production of the Ford Escape, which is the only model assembled in the country.
Assembly of the Mazda 3 ceased last month, with production transferred to Thailand and Japan.
“That’s why we think export incentives are important. It would take some time for the Philippine manufacturing to catch up with Thailand or Indonesia because they have economies of scale there,” Kreiger said.
“We cannot displace Thailand because they already had such a head start and they have a huge installed base of manufacturing and supply base and have a larger market,” the executive said.
“What you can do is complement. Because as you saw in the recent Thailand floods, you cannot put all your eggs in one basket, you can break your eggs. So companies are looking for secondary manufacturing plants. We have that today,” he added.
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