MANILA, Philippines (UPDATED) – The country’s only auto exporter has announced its final goodbye.
On Wednesday, June 27, American automaker Ford said it will shut down its assembly plant in the Philippines in 2013 and will just import completely built units.
Peter Fleet, president of Ford Asean, said in a press briefing the company will close down its facility in Sta Rosa, Laguna “due to lack of economies and small supply base.”
While around 250 jobs will be affected by this recent move, it also puts the Philippines off the automotive manufacturing network map in Asia. This industry has been a key job generator and helps stimulate the economy through, among others, the supply chain.
“This is a very difficult decision. The company studied every possible scenario and opportunity, but we could not make a strong enough business case for future manufacturing,” Fleet explained.
Currently, the Ford plant in Laguna is only assembling Ford Escape units, which it exports to affiliates in neighbors Indonesia, Thailand and Malaysia. Fleet said the plant will roll out the last of the Escape by the end of the year and cease operations next year.
Last February, Ford already halted the assembly of Mazda 3 and Ford Focus cars in Laguna and transferred these to its bigger plants in Thailand. These Philippine-assembled cars used to be exported to neighboring countries, too.
That earlier move with the car assembly operations was a portent of things to come.
Why end local operations?
This is the second time that Ford will pull out from the country. It did so in 1976 when the devaluation of the peso jacked up the prices of imported parts, raising the company’s costs.
It returned to the Philippines in 1999 when it started assembling several models sold locally and for export to affiliates in the region in its Ford $270 million-worth factory.
It boosted operations further when the adminstration of former President Arroyo pushed the Comprehensive Motor Vehicle Development Program (CMVDP), which aimed to revive the automotive manufacturing industry in the country by reducing taxes levied on raw materials coming from ASEAN neighbors.
However, the Aquino administration decided to shelve the program when the tax incentives lapsed in 2010. The government cited the program’s failure to expand the export volumes of completely built exports.
Ford had countered that the Philippine government did not do its part of curbing vehicle smuggling, as well as stop the spillover of tax-free second-hand cars sold in export processing zones onto the commercial market.
Ford and the automotive industry advocates have been pushing to extending tax perks to keep production in the Philippines, especially against more mature manufacturing bases like Thailand, which is considered as the Detroit in Asia. Ford is headquartered in Detroit.
While Ford officials had noted that Filipinos are highly skilled workers, its executives had explained that the lack of government support compounded the fact that the local market is not growing fast enough and the production costs are higher.
Ford Group Philippines president Randy Krieger had previously explained that “Production cost in the Philippines is significantly higher than in Thailand because of a smaller domestic sales base, high power costs and limited availability of auto parts.”
“With free trade within Asean, it’s difficult to export from the Philippines,” he had said.
Thais buy a total of over 800,000 units a year. Filipinos, on the other hand, have been buying around 142,000 vehicles only.
In 2011, Ford sold 9,778 units and exported almost half of its production from the Sta. Rosa assembly plant that can churn 25,000 units a year.
Ford Escape, the last product line in the Laguna assembly plant, accounts for only 10% of total sales.
Ford said it had exported more than 80,000 vehicles worth $1 billion from its Laguna factory over to Thailand, Malaysia and Indonesia since 2002.
Ford said they will retain sales operations in the Philippines, expand dealership, and keep its aggressive sales growth plans.
Earlier, the company announced that it will open 12 new dealerships this year to bring its nationwide network to 35 authorized dealers.
It added that the affected 250 workers in the Laguna plant will have the option to join other Ford companies overseas. – Rappler.com