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Ford Boosts Canadian Business by Investing in its Ontario Plant
Posted by: Live investor (IP Logged)
Date: September 22, 2013 09:17PM

Ford Motors (F) has plans to invest around $678 million in the Oakville, Ontario assembly plant in Canada primarily to boost its North American business. Ford is the largest automaker in Canada and proposes to increase its capacity to produce higher number of vehicles and respond to the increase in sales as demand is improving.

While the auto market in the U.S. is rebounding with the recovery in the housing sector and increase in consumer confidence, Ford is enjoying remarkable sales jump. The automaker is doing well at home, it has other growth plans as well. Ford is a more popular brand in Canada than fellow player General Motors (GM) or Chrysler. The Blue Oval’s Canadian car sales in August were higher than General Motors’ or Chrysler’s.

So what is the Blue Oval planning for the long run?

Now that remains a bit unclear. We know that the second largest US automaker is increasing its focus to the North American business where it plans to revamp its manufacturing facilities and add flexibility to its assembly plants to produce new global vehicles. However when asked, the company’s President Joe Hinrichs declined to comment regarding which “new global models” it wishes to produce in the unit.

The Oakville plant primarily builds four different SUVs: the Ford Edge, Flex, Lincoln MKX and MKT. The automaker is said to manufacture its next generation vehicles on the design platform. The company has been promoting its One Ford strategy to globalize its offering and benefit from economies of scale. At present, the Detroit giant builds around 85% of its vehicles out of nine platforms. The company now aims to bring it down to six manufacturing units. As per Reuters, the carmaker shall assemble Ford's Edge and MKX crossovers at the Oakville assembly plant. Ford is very excited that demand is moving up to pre recession levels.

Canada is one of Ford’s key markets where the automaker is investing to strengthen operations. One advantage of the Canadian market is that competition isn’t as tough as in Ford’s domestic market where it faces stiff competition from General Motors, Toyota (TM), Honda (HMC) and others.

Ford said that work on the Oakville plant is expected to wrap up by autumn 2014. The car maker is extremely committed to its Canadian business which is pretty much visible from the amount of investment made and the number of people involved in building the plant. The expansion program is expected to create 2,800 jobs.

My takeaway

The Canadian government shall contribute about 71.6 million Canadian dollars towards Ford’s Oakville project. Labor cost in Canada is comparatively high, but it is the government support and the scale of work that is boosting the company’s business base.

Investment in the Canadian plant is helping the company create the much needed capacity not only to manufacture global products, but also to secure more jobs. The company exports its models from the Oakville unit to over 80 countries including economies like Brazil and China. In fact, the facility’s positioning in Oakville is turning out to be one of Ford’s most critical, competitive and prominent plants to serve the global market. It would be interesting to watch how Ford benefits from the rising demand and takes advantage of its strong footprints in Canada.


Stocks Discussed: F, GM, TM, HMC,
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