Gabriel López
President and Director General
Ford de México
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View from the Top

Investment in New Models to Refresh Image

Thu, 09/01/2016 - 10:17

Q: What does Ford expect from its new investments in Mexico?

A: Ford is expanding its diesel engine production capacity in Chihuahua. In Hermosillo, Sonora we are completing projects to launch our 2017 models, which will give our image and mechanics a significant boost. Every plant has a continuous investment plan that involves capacity, production and quality. We made three investments in 2016, including our new engine plant in Chihuahua, the new transmissions plant in Irapuato, Guanajuato and the new vehicle assembly facility in San Luis Potosi. The construction of the projects in Chihuahua and Irapuato are complete and we are installing the equipment. We plan to begin volume production in 2018, leaving time for dry runs.

Q: How is Ford increasing production in 2016?

A: The second half of the year will not vary greatly from the first. Our production in Mexico is destined for the US market, which is seeing a shift in preference because of lower oil prices. Large vehicle demand has grown while the appetite for smaller units has shrunk significantly. Mexico’s car exports to the US, which are mainly in the compact segment, have dropped. The industry here does not expect change in the short to medium term since oil prices are expected to remain low for the next 12-24 months. New production plants could offer better balance in the current market by focusing on market demands.

Q: How is Ford planning to strengthen its position in the Mexican market?

A: Our objective is to satisfy the market as efficiently as possible. The Mexican market grew 18 percent more than in the first half of 2015 but it does not come close to the US in price. Mexican market prices are dramatically lower. Depending on the model, the difference in unit price can be US$3,000-10,000.

The dollar exchange rate volatility has created problems worldwide. Most currencies have dropped in value to the dollar, creating economic uncertainty. The automotive industry is always trying to improve competitiveness through incentives and projects developed to improve overheads and efficiency of plants. There is little room for improvement in Mexico as it is home to some of our most efficient and highest-quality plants in the world.

Q: What role does platform integration play in the company’s global vision?

A: The industry is under a lot of pressure to comply with regulations. It is probably one of the most regulated industries in the world because international authorities and environmental organizations blame automotive sectors for climate change. The industry is responsible for 30 percent of total air pollution. Electricity generation stands out as a polluter because 50 percent of the energy generated in Mexico and the US is from fossil fuels. Burning carbon produces high levels of carbon dioxide yet it is subject to fewer regulations.

Regulations are already stringent and they will only become stricter. Regions like China and Europe are implementing aggressive limits on emissions that will be enforced over the next decade. This will increase costs due to the investment in research and development needed to comply. Margins tend to be low to ensure competitiveness and certain automotive companies are concerned about being able to raise enough capital to adapt to these rules. Consequently, they seek associations to reduce costs and develop their technology and installations with varying degrees of success. Ford plans to remain independent as the company enjoys competitive advantages that keep it ahead of the industry.

Q: Where are the most outstanding market opportunities to promote innovation and add value to products?

A: Every area needs attention but regulations are so aggressive that further development is difficult. In 2015 and the first quarter of 2016, the North American automotive industry sold cars with an average fuel consumption of approximately 26mpg. Regulatory requirements for 2025 will be 54mpg. Technological changes need to be so significant they hardly seem attainable. However, as technology improves consumption will shift toward hybrid cars and more efficient internal combustion engines.