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Ford to invest $2.3 billion in Brazil Over next 5 Years

November 21st, 2009

fordThe Ford Motor Compny have unveiled plans to invest 4 billion reais ($2.26 billion) to boost output in Brazil as record-low borrowing costs and a rapid economic recovery in Latin America’s largest country stoke demand for new cars.

Most of the investments will go to Ford’s state-of-the-art plant in Camacari, a sprawling compound in the northeastern state of Bahia that churns out a vehicle every 80 seconds. The company, like rivals Fiat SpA and Volkswagen AG, has benefited from government tax incentives and a decline in interest rates that are fueling record Brazil sales in 2009.

“This is a very large investment for Ford,” Mark Fields, the company’s president for the Americas, told an audience of uniformed workers and local politicians that included Brazilian President Luiz Inacio Lula da Silva.

“For us this shows our confidence in the country, in the economy and the workers and consumers here in Brazil.”

Ford plans to spend 2.8 billion reais to increase output by 20 percent to 300,000 vehicles a year at the Camacari plant and to modernize its Troller unit in Ceara state that makes off-road vehicles, said Marcos de Oliveira, chief executive for Brazil and the Mercosur region.

Investments in Camacari, which produces the popular pint-sized sport utility vehicle EcoSport and the Fiesta subcompact, should create 1,000 jobs, he added.

The remaining 1.2 billion reais will go to Ford’s factories in Sao Paulo state, including its Sao Bernardo plant and a testing facility in Tatui.

“We decided to continue to invest in Brazil because it is our third-largest market and it is a country with a market that continues to grow,” Fields said.

Brazil has been a rare bright spot for global automakers, which are suffering much more in core markets like the United States and Europe. Car sales in the country are on track to hit another record in 2009, boosted by government tax incentives that helped lower car prices and lure consumers to showrooms.

The tax breaks are set to expire at the end of December, but Brazil’s automobile dealers’ association expects sales to grow another 9 percent in 2010, when the country is forecast to expand a hefty 5 percent.

As part of the investment plan, Brazil’s government will extend state and federal tax breaks to Ford until 2015.

“It is with great pride that I stand here in front of you to say that Brazil is going through a magical moment in its economic life, in its development,” said Lula, a lathe operator in the automobile industry in the 1970s who rose to become Brazil’s first working-class president.

Ford is the fourth-largest automaker by sales in Brazil and is the second U.S.-based company in the United States, behind General Motors Co GM.UL. The company, which considered pulling out of Brazil in the late 1990s, has racked up 23 consecutive quarterly profits in the country.

Brazil is a major market for global automakers such as Italy’s Fiat (FIA.MI), Germany’s Volkswagen (VOWG.DE), U.S.-based GM and Ford. Asian and French manufacturers are also relying increasingly on Brazil, a vast country where millions of people still don’t own cars, to offset slumping sales at home.

GM said in June it plans to go ahead with a $2.5 billion investment plan between 2007-2012 in the Mercosur region, which includes Brazil, Argentina, Uruguay and Paraguay. VW also plans to soon announce a large investment program in Brazil, according to local media.

By Peter Murphy

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