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Ford to pour $10m to localise Ikon

Sambit Saha

Ford India Ltd, the local subsidiary of Ford Motor Company, has estimated that capital worth $10 million need to be infused in phased-manner to scale up the localisation of the popular Ford Ikon model. Having phased out its Escort model recently, the company now sells two versions of Ikon model (called Fiesta worldwide) domestically.

Phil Spender, president and managing director, Ford India, said, "We are trying to localise the high value items that are yet to be indegenised. These include sophisticated items such as powertrain as well. The estimated cost for remaining localisation would be around $10 million."

Though Ford does not "yet have a firm plan" on the date of the investment, the strategy should dispel some of the pessimism over the passenger car sector which registered negative growth in the last fiscal.

At present, the Ford Ikon, available in 1300cc and 1600cc petrol versions, has localisation of 76 per cent, which the company wants to hike to over 90 per cent in a couple of years. The automaker currently builds cars using completely knocked-down kits and, in fact, was able to export many of them this year. Ford, in future, may also build gear boxes locally. Spender had earlier indicated a two-year timeframe for greater indegenisation.

This year, Ford is expecting a turnover of $330 million compared with $280 million last fiscal (January-December, 2000). It also plans to bring in five new models in as many years for the Indian market, the first of which is likely to be the highly-rated Focus mid-size sedan. At the same time, India has been selected as a base for exporting the Ikons to developing countries such as Mexico.

Analysts expect the possibility of further investment in Ford's Madras plant to reverse the pessimistic trend in the automobile sector in the recent past, when several foreign companies backed out of proposed investments in the country.

For instance, French tyre major Michelin had shelved its plan to set up manufacturing unit in India citing poor growth in the sector.

After a bumper growth of 56 per cent in 1999-00, the sale of passenger cars skid by 7.54 per cent in 2000-01. However, Ford had sold 17,922 cars in 2000-01 as against 8,023 in the previous year.

Ford's step is also expected to neutralise the problems the country has with the developed countries regarding the auto sector. The European Union and the US had charged India with following an investment regime, which violated World Trade Organisation norms. They had contented that the automobile sector in India was subject to regulations on local content, trade balancing and forex balance, all violative of WTO rules.

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