Shock, sadness and frustration at Ford’s announcement

(First of two parts)

Was it a case of perfect timing? The day before the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) hosted a media primer on its forthcoming 4th Philippine International Motor Show (PIMS), Ford Group Philippines (FGP) announced that it would close its assembly plant in Sta. Rosa, Laguna, by year’s end.

Ford’s shocking announcement made headlines in the business section of newspapers on June 28, the day after a press briefing where Ford Asean president Peter Fleet said that the closure of the plant was due to the restructuring of the company’s regional manufacturing operations as well as the lack of economies of scale and an adequate automotive supply base in the Philippines.

Of course, FGP quickly added that the plant closure would not affect Ford dealer showrooms, vehicle availability or customer service, what with  eight all-new Ford vehicles to be introduced by 2015 and 12 new Ford dealerships to be opened nationwide.

Impact. Nonetheless, FGP’s pledge to continue and even expand Ford sales and service does not diminish the impact of the impending plant closure. CAMPI directors and officers appeared glum last Friday, June 29, as journalists peppered them with questions about Ford. CAMPI president Rommel Gutierrez, a lawyer and vice president of Toyota Motor Philippines, gamely replied to my question about the timing of Ford’s announcement that he did not think it was malicious, assuming that FGP did not know about CAMPI’s scheduled PIMS primer that day.

Ironically, CAMPI distributed a bullish press release last Friday claiming that “the timing of the 4th PIMS could not have been better” since the 30.7 percent year-on-year growth in sales registered in May “is a clear sign that the industry is on the road to recovery and is achieving its targets in the industry road map. . . . With the introduction of new car models, improved supply conditions, sustained consumer confidence and the country’s thriving economy, we at CAMPI are confident that the local auto industry will attain our 2022 vision for the Philippines to be a competitive manufacturing base of motor vehicles and parts and components, serving both the domestic and export markets.”

Targets. In the same optimistic press release, the umbrella organization of 13 car companies and affiliates cited the road map targets that it expects to achieve by 2016: 1. increase production output to 285,000 units from the current 14,265 units as of May 2012; 2. increase domestic CKD sales to 195,000 units; 3. maintain localization levels to (sic) at least 40 percent; 4. export 90,000 vehicles; 5. increase parts export to $4.8 billion from $3.8 billion as of end-2011.

Now, CAMPI has had to issue a more subdued statement regretting Ford’s announcement and noting that Ford is an incorporator and active member of the Philippine Automotive Competitiveness Council Inc. (Pacci) but not a member of CAMPI. “The industry will maintain its sales and production target for the year and CAMPI will continue to assess the effect of Ford’s announcement, especially on local manufacturing,” Gutierrez said, adding that CAMPI will continue to work with the government to maintain the viability of the auto industry, particularly in enhancing the competitiveness of producing motor vehicles locally.

Pacci, which was founded in March 2009 by the Motor Vehicle Parts Manufacturing Association of the Philippines (MVPMAP), FGP, Honda Cars Philippines, Isuzu Philippines Corp., Mitsubishi Motors Philippines Corp. and Toyota Motor Philippines Corp., is chaired by MVPMAP chairman emeritus Feliciano Torres, with Toyota Motor Philippines chief executive Michinobu Sugata as president.

Saddened. Since Torres was out of the country, Sugata responded to my request for a statement by saying that Pacci “is saddened by Ford’s announcement that it will cease local CKD production next year. Ford is a major player in the automobile industry and has been taking an active role in Pacci. Pacci will remain steadfast in its advocacy to strengthen the competitiveness of local manufacturers of vehicles and its members will continue to have strong collaboration between the auto industry and the government to formulate relevant policies and programs at par or better than other countries aimed at sustaining the viability of local manufacturers of vehicles.”

MVPMAP president Ferdinand Raquelsantos was more pragmatic about Ford’s announcement. MVPMAP holds office in the Singalong, Manila, building of Yazaki-Torres Manufacturing Inc. In an e-mail to me, Raquelsantos said: “This is really frustrating for everyone, especially for the auto parts makers. All we pray is for Ford to still source their parts from us, particularly their current Philippine local parts suppliers. Saddest part is that we have invested a lot in our manufacturing facility including the cost of getting certification for QS9000, ISO 14001, TS16949 and Material Management Operations Guidelines. This will definitely affect our operations and corresponding lay-offs will happen.

How we wish. “The sentiment of our members is that they don’t think serious efforts were really done to convince Ford to stay. We feel that there should have been a higher level of intervention, say from our President Aquino, in courting them to continue their assembly operations.  How we wish there could still be some strings left to pull them back.

“We hope that we learned something from this loss and (it) does not give any negative perception in our auto industry. We should continue to support other OE assemblers and make their stay viable and competitive.”

So it looks like the closure of Ford’s assembly plant will have a ripple effect on the nation’s economy. Aside from the 250 remaining factory workers of FGP, some auto parts employees will lose their jobs, dealing a blow to the country’s aspirations to become a regional auto manufacturing hub.

Conclusion next week: The DTI and AVID react