Ford May Stop Thailand Investment

[ChiangMaiAmerican]

Ford may stop Thailand investment

(BangkokPost.com, Agencies)

Ford Motor Co said today in Washington that it is considering whether to scrap a planned $1 billion programme in new and upgraded factories in Thailand over the recent curbs on currency and foreign investment.

Ford will decide where to invest the earmarked $1 billion by the end of June. China and India are possible alternative destinations.

http://bangkokpost.com/breaking_news/break...s.php?id=116447

And from the original Bloomberg article:

``There is a misunderstanding that this government is protectionist and doesn't want foreign investment,'' Thailand's Finance Minister Pridiyathorn Devakula said today. ``I want to repeat again that all the measures are to help domestic businesses be able to compete.''

http://www.bloomberg.com/apps/news?pid=206...&refer=home

And from InvestorDictionary.com:

Protectionism is the economic policy used by a government, which is designed to shield domestic industries and producers from foreign competition.

http://www.investordictionary.com/definiti...tectionism.aspx

[Jai Dee]

Ford May Scrap Up to $1 Billion of New Thailand Investments

Ford Motor Co., the world's third- largest carmaker, may scrap as much as $1 billion of planned investment in Thai factories after the nation's military-backed government imposed currency and foreign-investment curbs.

"These things make it extremely difficult to do business in a globally competitive environment,'' Steve Biegun, Ford's Washington-based vice president for international government affairs, said yesterday in an interview in Bangkok, where he met leaders including the Prime Minister. "What we need in our business is predictability.''

More from Bloomberg here.

[Dupont]

Interesting.

The wording is a very clear shot accross the bows for the Thai Government.

Familiar expresions from the big boys here, things we have been saying for years. How safe is my investment after the next chage or coup. Think they are starting to come to the same conclusions as we have about buying houses, land, new boats, equipment etc.

All these foreign firms require massive hi tech investment, research and develpment and expansion to be worth anything to the Thai Government.

They may think they can earn a fast buck with this law change, and they may be right, but it will be a major catastrophe and worth nothing in a year or so. These companies are worth more in foreign hands, as they are better managed, and provide many jobs in the community.

Interesting that its Ford. Thialand has a massive pick up market, but a lot of its on finance. Maybe Ford have seen the writing on the wall for the Thai pick up market!

Edited January 31, 2007 by Dupont

[Scott]

But companies should just be happy that Thailand lets them be here! After all, some of them are just after money.

Anyway, Ford probably isn't really a "quality" investor.

[Mai Krap]

Ford could be sending out a warning shot for Thailand to get it together or it might be a signal Ford is preparing to pull the plug on Thai operations!

[hiromj]

Well, there goes my business trips to Thailand

[Dupont]

Well, there goes my business trips to Thailand

Slighty OT but this is one area that is totally overlooked.

How much revenue do people generate just holding a meeting in Bangkok? All those execs. need flights, taxis, hotels, beer, "nightlife", food, cultural trips and golf mornings to satisfy the missus they havn't just been here on the lash for a week!!

Then there;s the Farang staff getting hitched, buying houses, bringing the entire family over for the wedding. The mates coming over for jollies to see Thailand.

Unseen Thailand was quite a good slogan for most of the Governments we have had here recently. They just don't see or the realise on effects their stupid statements have.

Mind you they only stand to loose 35 billion baht in one fell swoop here, far less than the 800 billion they lost in a day in December.

[Mai Krap]

Well there may be more to this story afterall, seems like its a carrot and stick act for a tax break they are lobbying the government for concerning the new eco-car.

Ford eco-car plan awaits tax policy

PHUSADEE ARUNMAS

Ford Motor Company plans to invest US$1 billion in a Thailand eco-car production base for worldwide export, if the government offers competitive excise tax benefits for the project. Ziad Ojakli, Ford's group vice-president for corporate affairs, was part of a Ford management team from the United States that met with Commerce Minister Krirk-krai Jirapaet yesterday to discuss the issue.

Following the meeting, Mr Krirk-krai said that Ford had expressed its interest in further investment in Thailand of around $1 billion for eco-car production.

Annual export volume would be 20,000 cars and the project would generate 10,000 jobs in Thailand.

For now, the government's definition of an eco-car is one that consumes five litres of gasoline per 100 kilometres.

The reduction of excise tax for eco-cars was a crucial issue for Ford, which was waiting for news from the government, said Mr Krirk-krai.

''Ford will make a decision whether to invest in eco-car production in Thailand once a tax incentive is announced by the government, expected to be made in May,'' said Mr Krirk-krai.

Ford executives said the company was also considering other countries in South America and Eastern Europe for a production base, said Mr Krirk-krai.

Ford did not submit an application for the eco-car project to the Board of Investment in December, the deadline for submissions. Six manufacturers met the deadline: Honda, Toyota, Nissan, Mitsubishi, Suzuki and Yontrakit Co.

[ThaiGoon]

Well, I'm sure this has absolutely nothing to do with the fact that Ford had a record 12 billion loss last year. It's only the new amendments in FBA that have influenced this decision.

[singa-traz]

Well, I'm sure this has absolutely nothing to do with the fact that Ford had a record 12 billion loss last year. It's only the new amendments in FBA that have influenced this decision.

and here is one article for the details ...

Ford cash in focus as clock ticks on turnaround

Friday January 26, 1:14 pm ET

By Poornima Gupta

DETROIT (Reuters) - Ford Motor Co. (NYSE:F - News) is in a race against the clock with Wall Street measuring its progress over the next two years by the cash remaining on its balance sheet.

Ford on Thursday posted a record $12.7 billion loss for 2006 and provided the first indication of its cash burn since mortgaging assets to fund job cuts and plant closings at a time when sales of its key high-margin trucks are under pressure.

Ford said it burned through $20 million a day in the last three months of 2006 and expects to spend $17 billion before returning to profitability in 2009.

Analysts said Ford's recently raised $23.5 billion gives it two years to turn itself around, barring a steep decline in the U.S. economy.

Compounding the risk for Ford, analysts say the automaker must still hit the mark with new products such as the Edge crossover SUV and avoid a costly confrontation with its unionized factory workforce.

"You can limp along for a long time on $46 billion in cash," said Andrew Harding, director of taxable fixed income at Allegiant Asset Management in Cleveland. "They've got the liquidity to survive."

Ford is in the early stages of a turnaround plan dubbed "Way Forward" that includes closing 16 plants and cutting up to 45,000 jobs in North America. Ford last profitable year was 2005.

By the company's own estimate, it expects to see further losses in the coming quarters and has forecast profitability only in 2009.

But some analysts say Ford may have underestimated its cash requirements for the next three years.

"We are skeptical with regard to whether they are able to achieve their (cash burn) forecast as they have tended to err on the side of optimism," said Pete Hastings, a corporate bond analyst at Morgan Keegan.

Ford obtained $23.5 billion of new liquidity in December, including a convertible debt offering, secured loan and credit facility. This resulted in total automotive liquidity of $46 billion at the end of 2006.

But the cash burn has already started. The company spent $1.8 billion last quarter.

"Although management secured its liquidity position with the recent refinancing, the company continued to burn through cash at an alarming rate," said Calyon Securities analyst Joseph Amaturo, who expects Ford will spend more cash that the $17 billion it has forecast because of a marked slowdown in its automotive unit.

Morgan Keegan's Hastings said the longer-term question is what options Ford has remaining if its turnaround hits hurdles.

Although many analysts say Ford's new Chief Executive Alan Mulally has the right vision for a leaner Ford, some also remain cautious about whether he can carry out the transformation.

"Ford is more likely to surprise us on the downside rather than on the upside," said Shelly Lombard, senior high yield analyst at Gimme Credit.

Ford is not the only automaker hurting. For the first time since 1991, all three Detroit automakers are set to book losses in the same year, underscoring the changing tastes of U.S. consumers and the intense competition from the likes of Toyota Motor Corp. (Tokyo:7203.T - News), now the No. 3 player in the U.S. market.

All three were hit hard as U.S. consumers moved away from the trucks and sport utility vehicles that had accounted for most of its sales and profits.

Ford is hoping that once it cuts its manufacturing capacity, its new products that are expected to be more fuel-efficient will help return the company to profitability.

Mulally told analysts that the plan is to continue "cost reduction forever."

A big opportunity to do that would be at the upcoming labor contract negotiations with the United Auto Workers union this summer.

Mulally said on Thursday that all issues -- including health-care costs, wages and benefits -- were on the table with the union.

While Mulally said he was not seeking a confrontation with the UAW, analysts say any work stoppage could also put pressure on Ford's cash position.

"An extended shutdown of the company's operation could force the company into a liquidity crisis despite its strong liquidity position," said Kam Hon, analyst for ratings agency DBRS. "Any signs of stalling in executing the Way Forward plan and disruptive labor actions during contract negotiation may lead to negative rating actions."

[sibeymai]

What's that saying...."The chickens coming home to roost" ? Don't tell me the Finance Ministry couldn't see this one coming. Combined with the strengthening of the baht I wouldn't expect any major investments from overseas corporations. Toyota could well be the last auto manufacturer to set up a new plant here. Given that such plants require multi-billion dollar investments in retooling every 15 years or so any plants which require this kind of investment any time soon will probably be shut down instead. Doesn't just happen in Thailand either. In 15 years from now there's bound to be cheaper places to make cars than Thailand.

Edited January 31, 2007 by sibeymai

[taxexile]

Well, I'm sure this has absolutely nothing to do with the fact that Ford had a record 12 billion loss

good point , ford are in trouble and looking for savings anywhere they can find them.

[Plus]

Ford has invested heavily in Thailand already, it was the first car-maker that targeted primarily exports.

Their domestic sales have been disastrous and they've burned on Thai government a few times already - first over the taxes on their pickups, then on their ethanol 20 engines. Doubts about Ford's future investments were expressed last year, before capital controls and FBA.

What were they going to do with their billion anyway? Thailand doesn't need more Ford trucks, and they can't build another pickups for export plant somewhere in India, split away from Mazda (they use the same plant and same designs), it won't be competitive with Thai made trucks from Mitsubishi and Toyota, and even Ford itself.

Maybe it's a payback time. Ford certainly doesn't have a lot of sympathy left.

Maybe Ford simply admits losing another market to Japanese.

[ThaiGoon]

singa-traz, thanks for the article.

[drummer]

Well, I'm sure this has absolutely nothing to do with the fact that Ford had a record 12 billion loss last year. It's only the new amendments in FBA that have influenced this decision.

In other news, Ford has decided to invade Iraq in order to save money....

A 12.7 billion USD loss is astonishing and if Ford wasn't cutting costs, then that would be equally surprising.

[thai_narak]

I think it is not about the protectionism to protect domestic businesses but Ford is really a mess in Thailand. How many ford cars are running in streets?

[Plus]

I suspect it's 12 billion BAHT, not dollars, from their Thai operations. Most probably Philipino made cars (Focus and Escape) are not counted.

[cclub75]

Well, I'm sure this has absolutely nothing to do with the fact that Ford had a record 12 billion loss last year. It's only the new amendments in FBA that have influenced this decision.

Indeed. This is why Ford is definitly not a "quality investor" !

More seriously : even if I agree with you (to scrap an investment when your company post record losses, it's normal) however, I like when the thai gvt takes a slap on the face like that.

Yesterday, another one, japanese released a survey : Thailand this month ranked lowest among five Asean countries for Japanese business sentiment.

http://www.nationmultimedia.com/2007/01/31...ss_30025566.php

Pressure.... presssure.

And meanwhile, our "czar", the famous Pridiyathorn, AKA Finance minister, continues to say like a dead chicken without head, that it's a "misunderstanding", that the new regulations are meant to ease the work for foreigners, to achieve a better rozy capitalist world (with a touch of "self sufficiency" though), etc, etc.

Sleep well.

[wintermute]

And meanwhile, our "czar", the famous Pridiyathorn, AKA Finance minister, continues to say like a dead chicken without head, that it's a "misunderstanding", that the new regulations are meant to ease the work for foreigners, to achieve a better rozy capitalist world (with a touch of "self sufficiency" though), etc, etc.

Sleep well.

I don't think he realizes that these international corporations have brilliant economists, business analysts, and investment bankers at their disposal. They aren't quite so easy to bullsh*t like the fairly ignorant Thai population. The Japanese are still savvy businessmen so i'm sure they looked at many angles in investing in Thailand before downgrading the investment rating. If the Japanese say things are too screwed up and are thinking about jumping ship then something serious is going to happen.

[Plus]

I like when the thai gvt takes a slap on the face like that.

Maybe it will wake them up that Pridiyatorn doesn't cut it anymore, but otherwise it's a bit perverse - enojoying slaps on Thai face.

Seriously, Ford is in deep shit here and additional investments won't save them. A BILLION dollars - it's more than Toyota invested in IMV project that produced Vigo, Fortuner, Innova, and Hiace van.

Ford Thailand can't be trusted with this kind of money judging by their records do far.

Don't get me wrong - I wish to see Ford challenging Japanese to keep the market healthy, but not by burning money on the likes of Ford Everest.

[backflip]

"I suspect it's 12 billion BAHT, not dollars"

Nope, it's dollars, and that's only 2006. Ford expects losses through 2007 and 2008, but a profit in 2009.

Edited January 31, 2007 by backflip

[Plus]

Well, they certainly should invest in more profitable divisions than Ford Thailand, or at least overhaul their management here first.

[John K]

I must admit it took a lot of courage to say this:

``There is a misunderstanding that this government is protectionist and doesn't want foreign investment,'' Thailand's Finance Minister Pridiyathorn Devakula said today. ``I want to repeat again that all the measures are to help domestic businesses be able to compete.''

loose translation;

Our way is better we just have to slow you down first.

The issue here is the Thais have the same resources and non Thai companies, the only difference is the management methods. At some point the Thais must come to terms with that. China has successfully adopted methods from other countries and had become a juggernaut in manufacturing. It seem that Thai culture has become their handicap when trying to compete in the world arena. Thaksin had no problem in tossing culture when he decided he wanted to make money, however he did not always play by the rules either.

I suspect another tweak in the new 30% rule soon.

[PeaceBlondie]

Don't tell me the Finance Ministry couldn't see this one coming.

The Finance Ministry couldn't see this one coming.

[The Skipper]

Seagate pulled a major project out of Thailand last year. 40,000 new jobs went somewhere else.

Corruption is a big factor.

Tough to run a business when the Thai Officials want a piece of the action.

[HenryB]

But companies should just be happy that Thailand lets them be here! After all, some of them are just after money.

Anyway, Ford probably isn't really a "quality" investor.

Ford should learn that Thailand can do without them. Remember Thailand built the first car.

[wintermute]

Ford should learn that Thailand can do without them. Remember Thailand built the first car.

Indeed and what a marvel it was! powered by sangsom and built with som tam.

[nick2k]

ford should go back home to where its roots are. they went overseas thinking that they could save money. but the reality is - if they built plants outside the usa, they will lose more than is gained.

the writing is on the wall.

if you built in a foreign country, the foreign country will steal your investment from you.

look at what happened in malaysia, bolivia, venezuela, and soon to happen in argentina. and now, here in thailand.

this trend is happening more and more.

get smart. invest only in your home country.

ALL american companies need to go back home to invest ONLY in their home country. the jobs should be in america for americans.

[lukamar]

Here is the way I see it.

Other companies in Thailand, or thinking about investing in Thailand, see a headline like "Ford pulls out of Thailand goes to (enter your own country)" and they ask themselves why, how does it apply to us and what did they know that we do not. If Ford is in trouble, or not, if they go somewhere else it is a signal to others and it's not a good signal. What happens if other big companies pull out or (and we will not know this) don't invest the amount they had planned? Will something like this cause small investors to stay away? It's not good news no matter how you rotate the cube.

[farang prince]

But companies should just be happy that Thailand lets them be here! After all, some of them are just after money.

Anyway, Ford probably isn't really a "quality" investor.

Please tell me you are joking. If not, this is perhaps one of the most idiotic posts I've ever read on TV.