Vietnam must move now to save automakers
HANOI - The head of Ford Vietnam said on Tuesday that Hanoi must
move quickly to ban second-hand vehicle
imports or else risk the collapse of its fledgling
auto industry.
Murray Gilbert, general director of the Ford
Motor Co Vietnam joint venture, warned that
without positive action from the government,
competition from other Association of South
East Asian Nation (ASEAN) countries could be
overwhelming.
``In 2006, if Vietnam doesn't have a viable
auto industry then it won't have one because
under the ASEAN trade agreement components
can be imported from any other ASEAN
country,'' Gilbert said in an interview.
As part of its integration into the ASEAN Free
Trade Area (AFTA), Vietnam agreed to a pact
on Common Effective Preferential Tariffs that
requires it to slash import duties for most goods
from member countries to between zero and
five percent within 10 years from 1996.
``If the Vietnamese government doesn't move
very quickly... then the automotive industry, or
components industry in particular, may not be
strong enough to survive competition from
Thailand and other ASEAN countries that have
well developed automotive industries,'' Gilbert
said.
Since 1991, Vietnam has licensed 14 foreign
invested companies to assemble motor vehicles.
Licences have strict rules on localisation that
require vehicles to have 10 percent local content
within five years, rising to 30 percent after 10
years.
From 2006, components sourced anywhere
within ASEAN would be considered locally
produced in Vietnam.
Sales volumes of locally assembled vehicles
have remained low, making it hard for
component manufacturers to justify investing in
Vietnam, Gilbert said.
``If the Vietnamese government wants its own
component manufacturing element of the
business then they need to move rapidly to ban
second-hand imports,'' Gilbert said.
He estimated that between 20,000-22,000
vehicles would be sold in Vietnam this year, of
which around 6,000 would be locally assembled
and the majority of the rest would be
second-hand imports.
The Ford plant, located 60 km (37 miles) east
of Hanoi, opened last November and has a
design capacity of 14,000 vehicles annually.
Ford Vietnam produces five models, which
include a four-tonne truck and variants of its
popular Transit model. It expects to begin
assembling cars next year, Gilbert said.
Gilbert added that since production began, Ford
has assembled just 250 vehicles, of which only
150 have been sold. He said he only expected
to sell a total of 550 in 1998.
``When I did the business plan last year I said I
would sell 700 vehicles this year. It'll be about
550 I think, we're slightly down...and to be that
close a year later in the middle of the economic
turmoil that's around, I'm not that unhappy,'' he
added.
A Vietnamese executive at the plant, which cost
around $40 million to build, said that to save
costs Ford was only assembling when it had
orders in hand and that on average there was
only enough work for about two weeks of every
month.
Eight of the 14 licensed assemblers have begun
operations, but most have reported laying off
workers and weak order books. Only one
company -- Chrysler Corp with a $192 million
project -- has pulled out, although its licence has
yet to be revoked.
Gilbert said Ford Vietnam, as with every other
manufacturer in Vietnam, had excess capacity
and it was normal to have days with no
production but that he had not laid off workers.
``I'm still optimistic, we never saw the road as
being easy,'' he said. ``We are a little bit like a
cockroach in a nuclear war in that we intend to
be the one positioned so that we survive.''
``There will be a shake out in the market, it's
already happening.''
By Andy Soloman - REUTERS, June 23, 1998.
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