Ford and Gm in Russia
Ford & General Motors in Russia
In July 2002, Ford Motor Company officially opened its first Russian car factory near St. Petersburg.
The factory, which cost some S150 million to build, is 100% owned by Ford and represents the first wholly owned investment by a foreign carmaker in Russia. The factory is tiny by international standards; it will employ 800 people and initially will produce 10,000 Ford Focus cars a year. By comparison, a typical auto plant in the developed world produces 200,000 cars a year. If things go well, Ford plans to increase production to 25,000 cars a year by 2007, and if things go really well, the plant may ultimately produce 100,000 vehicles a year. If these plans come to fruition, it could be a boon for the region. Assembly-line workers at the Ford factory will make approximately $220 a month, significantly more than the $134 average wage in Russia, and skilled engineers at the factory may make as much as $600 a month.
Ford was motivated in part by a desire to gain a foothold in the Russian car market. Although car ownership levels in Russia are very low by international standards—120 cars per 1,000 people compared to 580 per 1,000 in Western Europe— car sales have been rising by 7 to 8% a year. In 2002, about 1.5 million new and used cars were bought in Russia, about 1 million of which were Russian cars. New Russian models sell for $5,000 to $8,000. Ford intends to sell its locally produced Ford Focus for about $10,900, a price premium that Ford believes is justified given the poor reputation of Russian cars. An imported Ford Focus currently sells for $14,000 due to transportation costs, import duties and higher wages at Ford's Western European factories.
With the Russian government increasing import duties on finished cars to about 35%, and the political climate stabilizing, Ford thought it was time to establish local production.
Although most imported automobile components face a 25% duty, in exchange for duty-free status
In July 2002, Ford Motor Company officially opened its first Russian car factory near St. Petersburg.
The factory, which cost some S150 million to build, is 100% owned by Ford and represents the first wholly owned investment by a foreign carmaker in Russia. The factory is tiny by international standards; it will employ 800 people and initially will produce 10,000 Ford Focus cars a year. By comparison, a typical auto plant in the developed world produces 200,000 cars a year. If things go well, Ford plans to increase production to 25,000 cars a year by 2007, and if things go really well, the plant may ultimately produce 100,000 vehicles a year. If these plans come to fruition, it could be a boon for the region. Assembly-line workers at the Ford factory will make approximately $220 a month, significantly more than the $134 average wage in Russia, and skilled engineers at the factory may make as much as $600 a month.
Ford was motivated in part by a desire to gain a foothold in the Russian car market. Although car ownership levels in Russia are very low by international standards—120 cars per 1,000 people compared to 580 per 1,000 in Western Europe— car sales have been rising by 7 to 8% a year. In 2002, about 1.5 million new and used cars were bought in Russia, about 1 million of which were Russian cars. New Russian models sell for $5,000 to $8,000. Ford intends to sell its locally produced Ford Focus for about $10,900, a price premium that Ford believes is justified given the poor reputation of Russian cars. An imported Ford Focus currently sells for $14,000 due to transportation costs, import duties and higher wages at Ford's Western European factories.
With the Russian government increasing import duties on finished cars to about 35%, and the political climate stabilizing, Ford thought it was time to establish local production.
Although most imported automobile components face a 25% duty, in exchange for duty-free status