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Volvo to sell China-made luxury cars

MONDAY, MARCH 20, 2006

BEIJING The Swedish carmaker Volvo said Monday that it would start selling locally made S40 luxury sedans in China.

Ford Motor’s joint venture in China will produce 10,000 units of the S40 sedans a year from Changan Ford’s plant in the western city of Chongqing, said Frederik Arp, president and chief executive of Volvo Cars.

Volvo will start selling the S40 sedan this summer, which is from June to August in China.

“Local production is the key to remain competitive in China,” Arp said at a press conference. The company is facing a situation where its “main competitors are already producing their volume models locally.”

Rising incomes in China have generated an increasing number of buyers for premium cars. Car sales in China rose 21 percent in 2005 to 3.97 million units and could grow 17 percent this year, according to the China Association of Automobile Manufacturers.

So far, Volvo has imported cars into China. Last year, it sold 4,786 units, an 84 percent increase over 2004. Sales of the S40 accounted for nearly a third of the total.

Bayerische Motoren Werke said sales of cars made in China rose 77 percent to 15,300 units last year, compared with a 9.9 percent sales gain worldwide. BMW, which set up its China venture in 2003, makes five models at its venture in the northeastern city of Shenyang.

DaimlerChrysler’s venture in China, which started to sell locally made Benz sedans in December, increased sales of imported Benz cars by 39 percent to 16,128 units last year. The company is making two E-class models at its venture in Beijing. Chrysler Group plans to start making 300C sedans this year.

The decision to start local manufacturing was made because of “the significant growth of the overall market combined with the fact that the lion’s share of the growth is happening from local manufacturers,” Arp said. “So being an importer only is not necessarily a long term success situation.”

Depending on the demand, the output for the S40 from the Chongqing plant may rise, Arp said, without giving details. The sedan accounted for nearly a fifth of Volvo’s global sales last year.

“It’s a great advantage not to have to invest in all the facilities in a joint venture,” Per Norinder, Volvo Cars’ general manager in China said. “Changan Ford already has a factory up and running.”

A locally made Honda Civic

Honda Motor plans to sell locally made Civic compact cars in China.

The company, which produces the Civic in 12 countries, said it planned to sell 50,000 Civic units in China this year.

“Civic is more important for Honda in China than its other models like Accord, as the popular compact car model is more attractive to consumers with its cheaper price and fuel efficiency,” said Yale Zhang, an analyst with CSM Asia in Shanghai.

BEIJING The Swedish carmaker Volvo said Monday that it would start selling locally made S40 luxury sedans in China.

Ford Motor’s joint venture in China will produce 10,000 units of the S40 sedans a year from Changan Ford’s plant in the western city of Chongqing, said Frederik Arp, president and chief executive of Volvo Cars.

Volvo will start selling the S40 sedan this summer, which is from June to August in China.

“Local production is the key to remain competitive in China,” Arp said at a press conference. The company is facing a situation where its “main competitors are already producing their volume models locally.”

Rising incomes in China have generated an increasing number of buyers for premium cars. Car sales in China rose 21 percent in 2005 to 3.97 million units and could grow 17 percent this year, according to the China Association of Automobile Manufacturers.

So far, Volvo has imported cars into China. Last year, it sold 4,786 units, an 84 percent increase over 2004. Sales of the S40 accounted for nearly a third of the total.

Bayerische Motoren Werke said sales of cars made in China rose 77 percent to 15,300 units last year, compared with a 9.9 percent sales gain worldwide. BMW, which set up its China venture in 2003, makes five models at its venture in the northeastern city of Shenyang.

DaimlerChrysler’s venture in China, which started to sell locally made Benz sedans in December, increased sales of imported Benz cars by 39 percent to 16,128 units last year. The company is making two E-class models at its venture in Beijing. Chrysler Group plans to start making 300C sedans this year.

The decision to start local manufacturing was made because of “the significant growth of the overall market combined with the fact that the lion’s share of the growth is happening from local manufacturers,” Arp said. “So being an importer only is not necessarily a long term success situation.”

Depending on the demand, the output for the S40 from the Chongqing plant may rise, Arp said, without giving details. The sedan accounted for nearly a fifth of Volvo’s global sales last year.

“It’s a great advantage not to have to invest in all the facilities in a joint venture,” Per Norinder, Volvo Cars’ general manager in China said. “Changan Ford already has a factory up and running.”

A locally made Honda Civic

Honda Motor plans to sell locally made Civic compact cars in China.

The company, which produces the Civic in 12 countries, said it planned to sell 50,000 Civic units in China this year.

“Civic is more important for Honda in China than its other models like Accord, as the popular compact car model is more attractive to consumers with its cheaper price and fuel efficiency,” said Yale Zhang, an analyst with CSM Asia in Shanghai.

BEIJING The Swedish carmaker Volvo said Monday that it would start selling locally made S40 luxury sedans in China.

Ford Motor’s joint venture in China will produce 10,000 units of the S40 sedans a year from Changan Ford’s plant in the western city of Chongqing, said Frederik Arp, president and chief executive of Volvo Cars.

Volvo will start selling the S40 sedan this summer, which is from June to August in China.

“Local production is the key to remain competitive in China,” Arp said at a press conference. The company is facing a situation where its “main competitors are already producing their volume models locally.”

Rising incomes in China have generated an increasing number of buyers for premium cars. Car sales in China rose 21 percent in 2005 to 3.97 million units and could grow 17 percent this year, according to the China Association of Automobile Manufacturers.

So far, Volvo has imported cars into China. Last year, it sold 4,786 units, an 84 percent increase over 2004. Sales of the S40 accounted for nearly a third of the total.

Bayerische Motoren Werke said sales of cars made in China rose 77 percent to 15,300 units last year, compared with a 9.9 percent sales gain worldwide. BMW, which set up its China venture in 2003, makes five models at its venture in the northeastern city of Shenyang.

DaimlerChrysler’s venture in China, which started to sell locally made Benz sedans in December, increased sales of imported Benz cars by 39 percent to 16,128 units last year. The company is making two E-class models at its venture in Beijing. Chrysler Group plans to start making 300C sedans this year.

The decision to start local manufacturing was made because of “the significant growth of the overall market combined with the fact that the lion’s share of the growth is happening from local manufacturers,” Arp said. “So being an importer only is not necessarily a long term success situation.”

Depending on the demand, the output for the S40 from the Chongqing plant may rise, Arp said, without giving details. The sedan accounted for nearly a fifth of Volvo’s global sales last year.

“It’s a great advantage not to have to invest in all the facilities in a joint venture,” Per Norinder, Volvo Cars’ general manager in China said. “Changan Ford already has a factory up and running.”

A locally made Honda Civic

Honda Motor plans to sell locally made Civic compact cars in China.

The company, which produces the Civic in 12 countries, said it planned to sell 50,000 Civic units in China this year.

“Civic is more important for Honda in China than its other models like Accord, as the popular compact car model is more attractive to consumers with its cheaper price and fuel efficiency,” said Yale Zhang, an analyst with CSM Asia in Shanghai.

BEIJING The Swedish carmaker Volvo said Monday that it would start selling locally made S40 luxury sedans in China.

Ford Motor’s joint venture in China will produce 10,000 units of the S40 sedans a year from Changan Ford’s plant in the western city of Chongqing, said Frederik Arp, president and chief executive of Volvo Cars.

Volvo will start selling the S40 sedan this summer, which is from June to August in China.

“Local production is the key to remain competitive in China,” Arp said at a press conference. The company is facing a situation where its “main competitors are already producing their volume models locally.”

Rising incomes in China have generated an increasing number of buyers for premium cars. Car sales in China rose 21 percent in 2005 to 3.97 million units and could grow 17 percent this year, according to the China Association of Automobile Manufacturers.

So far, Volvo has imported cars into China. Last year, it sold 4,786 units, an 84 percent increase over 2004. Sales of the S40 accounted for nearly a third of the total.

Bayerische Motoren Werke said sales of cars made in China rose 77 percent to 15,300 units last year, compared with a 9.9 percent sales gain worldwide. BMW, which set up its China venture in 2003, makes five models at its venture in the northeastern city of Shenyang.

DaimlerChrysler’s venture in China, which started to sell locally made Benz sedans in December, increased sales of imported Benz cars by 39 percent to 16,128 units last year. The company is making two E-class models at its venture in Beijing. Chrysler Group plans to start making 300C sedans this year.

The decision to start local manufacturing was made because of “the significant growth of the overall market combined with the fact that the lion’s share of the growth is happening from local manufacturers,” Arp said. “So being an importer only is not necessarily a long term success situation.”

Depending on the demand, the output for the S40 from the Chongqing plant may rise, Arp said, without giving details. The sedan accounted for nearly a fifth of Volvo’s global sales last year.

“It’s a great advantage not to have to invest in all the facilities in a joint venture,” Per Norinder, Volvo Cars’ general manager in China said. “Changan Ford already has a factory up and running.”

A locally made Honda Civic

Honda Motor plans to sell locally made Civic compact cars in China.

The company, which produces the Civic in 12 countries, said it planned to sell 50,000 Civic units in China this year.

“Civic is more important for Honda in China than its other models like Accord, as the popular compact car model is more attractive to consumers with its cheaper price and fuel efficiency,” said Yale Zhang, an analyst with CSM Asia in Shanghai.

http://www.iht.com/articles/2006/03/20/bloomberg/sxford.php

China’s Reserves Top Japan’s as World’s Largest

March 31 (Bloomberg) — China overtook Japan as the world’s largest holder of foreign-currency reserves last month, the latest evidence of China’s rising influence as an international financial power.

The Chinese government’s currency assets excluding gold rose to $853.7 billion as of Feb. 28, surpassing Japan’s $831.6 billion, according to Bloomberg News calculations using government data. China’s reserves, which now account for 20.1 percent of the world’s total of $4.3 trillion, climbed a third during the past year. Japan’s reserves account for 19.5 percent of the total.

A record trade surplus and a flood of foreign investment has pushed China’s currency holdings higher, increasing pressure on the yuan to rise in value and prompting the government to encourage investment overseas and purchases of imports. The U.S., led by Treasury Secretary John Snow, is pressing China to let its currency move with market forces.

“One can think of the phrase `be careful what you wish for’ if China revalues,” said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. A strengthening of China’s currency could affect “import prices, inflation pressures in the U.S., and could make the Fed’s job more difficult,” Sinche said.

U.S. lawmakers are considering more than a dozen pieces of legislation that would place punitive tariffs on Chinese imports unless the yuan is allowed to strengthen. Lawmakers including Senator Charles Schumer, a New York Democrat, say China’s undervalued currency hurts U.S. exports.

Yuan’s Gains

Since the yuan, a unit of the renminbi, was revalued by 2.1 percent against the dollar on July 21, it has only gained about 1 percent. The yuan rose to the highest today since July’s revaluation on speculation the market will have more influence on exchange rates after the foreign ministry yesterday said currency participants determine the value.

The yuan rose as high as 8.0173 against the dollar and was 8.0175 at the 3:30 p.m. close in Shanghai from 8.0264 yesterday, taking gains on the week to 0.16 percent, according to data compiled by Bloomberg.

Canada’s central bank governor, David Dodge, said yesterday in Princeton, New Jersey, that China shouldn’t be allowed to “frustrate market forces” by blocking movements in exchange rates.

$1 Trillion

Both China’s government and central bank have said they will make the country’s exchange rate system more flexible, while ruling out another revaluation. China’s reserves may rise to $1 trillion by the end of this year, marking the first time any nation’s reserves have reached that level, according to Stephen Green and Tai Hui, China economists for Standard Chartered Plc China economists.

China’s trade surplus tripled to $102 billion last year, helping to drive economic growth of 9.9 percent, the fastest among the world’s major economies. Schumer and South Carolina Republican Senator Lindsey Graham, after visiting China last week, postponed a vote on their China sanctions bill to give the country more time to change its currency system.

People’s Bank of China Governor Zhou Xiaochuan said in a speech March 20 that adjusting the yuan’s value won’t reduce the trade surplus. He said China will need two to three years to achieve balanced trade by increasing domestic consumption.

“The Chinese government has started expanding domestic market demand, lowered deposit rates, liberalized markets, allowed for exchange-rate fluctuations as part of our policy of improving the balance of international payments,” Zhou said. “The U.S. side must lower its fiscal deficit and boost savings.”

Direct Investment

China’s reserves of foreign currency, which economists say are between 70 percent and 80 percent in dollars, rose by an average $17 billion a month in 2004 and 2005. That was also fueled by about $120 billion of foreign direct investment and billions of dollars of capital inflows betting on a rising yuan.

“We have to be somewhat careful about a radical revaluation” of China’s currency, said Mickey Kantor, a former U.S. trade representative under President Bill Clinton and now a partner at the law firm of Mayer, Brown, Rowe & Maw LLP. “It could lead to more non-performing loans, which could make the banking system weaker. This is something we do not want to do.”

Kantor said U.S. should still be “strong advocates” for a revaluation of China’s currency.

Treasury Holdings

China’s holdings of foreign currency assets are now so large the country is shifting more of the added reserves into euros and yen to reduce its exposure to dollar-denominated assets.

China has been investing its reserves in U.S. bonds and assets. China held $262.6 billion in U.S. government Treasury bonds at the end of January, making it the largest investor after Japan. China’s purchases of Treasuries have helped hold down market interest rates in the world’s largest economy.

On March 5, Zhou said China won’t reduce the size of its dollar holdings, though the central bank will “adjust” total reserves based on international market conditions.

In a separate report, the International Monetary Fund said today central banks cut their U.S. dollar reserves for the fifth straight year in 2005 and also pared their holdings of the euro and yen.

Central banks held 44.8 percent of their total foreign- exchange reserves in the U.S. currency at the end of the fourth quarter, compared with 46.8 percent in the same period of 2004, the Washington-based IMF said.

As recently as 2001 the world’s central banks held over half of their reserves in dollars. The new figures validate speculation among investors that central banks are reducing holdings of dollars in favor of other currencies.

Detroit’s Loss Is China, Slovakia’s Gain as Auto Jobs Move East

March 3 (Bloomberg) — General Motors Corp. pays Qiu Mingyuan $18 a day to build engines in Shanghai. Thousands of miles away in Oklahoma City, Adana Spain last week lost a job paying about 10 times more when GM closed a factory there.

Qiu and Spain are the face of an eastward shift in car production after automakers including DaimlerChrysler AG and Ford Motor Co. announced plans to cut 192,000 jobs in North America and western Europe over the past five years. As the companies display new models this week at the Geneva Motor Show, they are shifting jobs to countries such as Russia, China and Slovakia in pursuit of cheaper labor and sales in growing markets.

Last year, for the first time, automakers built more cars outside North America and western Europe than inside, according to PriceWaterhouseCoopers. The migration of jobs may not end for eight to 10 years, says Chris Benko, a car industry analyst for the consulting firm.

“They’ve been outsourcing our jobs for a very long time and it isn’t just GM,” says Spain, 59, who moved to Oklahoma in the early 1980s after GM closed the plant in Southgate, California, where her late husband worked. “The American plants, as far as General Motors and them go, it’s going to continue to buckle, and the foreign plants are going to grow and take over.”

While global auto sales will rise almost 19 percent in the next seven years, most of the increase will come from outside North America and western Europe, says Nigel Griffiths, a London-based analyst for Global Insight Inc. His firm projects sales will grow 5.5 percent in the two regions, compared with 36 percent in the rest of the world, including 20 percent in eastern Europe and 44 percent in Asia.

`Horrendously Painful’

“The dislocation is going to be horrendously painful,” says Benko, who is based in Detroit. “This industry has lived on borrowed time a long time and it needs to go through this readjustment.”

Factories in North America and western Europe produced 48.9 percent of the world’s cars last year, down from 50.5 percent in 2004, Benko estimates. That share will drop to 44.7 percent in 2013, he forecasts.

Detroit-based GM plans to close nine factories and eliminate 30,000 hourly jobs in North America by 2008. Last week, it shut the plant in Oklahoma City where Spain and her colleagues built Chevy TrailBlazers and other sport-utility vehicles.

The company sold 26.2 percent of all new cars in the U.S. last year, down from 51 percent in 1962. That loss in market share has left GM with too many U.S. plants and too many workers.

Spain, whose husband died in 1999, says she didn’t work for GM long enough to be eligible for full retirement benefits and will look for another job.

Toyota’s Rise

Toyota Motor Corp., on pace to unseat GM as the world’s largest automaker in the next few years, is increasing its market share in both the U.S. and Europe. Asian automakers captured a record 36.5 percent of the U.S. market last year. Their share of western Europe rose to 17.4 percent from 14.8 percent in 2000.

The stock of Toyota, based in central Japan’s Toyota City, has risen 53 percent in the past 12 months, compared with a 16 percent gain in the 19-member Bloomberg World Auto Manufacturers Index. GM shares have dropped 44 percent in the same period.

Like GM, Dearborn, Michigan-based Ford is shedding workers in North America. Chief Executive Officer William Clay Ford Jr., 48, in January said the automaker would close 14 plants and eliminate as many as 30,000 jobs during the next six years. DaimlerChrysler’s Chrysler unit cut 40,000 jobs in North America from 2000 to 2004 to end losses at that division.

In western Europe, carmakers such as Paris-based PSA Peugeot Citroen and Wolfsburg, Germany-based Volkswagen AG are offering early retirement and buyouts while opening factories further east.

Volkswagen, DaimlerChrysler

Volkswagen may eliminate as many as 20,000 positions in Germany in the next three years. Auto sales in western Europe declined 0.2 percent to 14.5 million vehicles last year and have yet to get back to the peak of 14.63 million sold in 1999.

DaimlerChrysler CEO Dieter Zetsche, 52, is spending about 3 billion euros to cut 14,500 jobs at corporate headquarters and the company’s Mercedes division, mainly in Germany. At the same time, he plans to invest about 1.5 billion euros in China to make Mercedes and Chrysler models there.

GM and Ford have announced a combined 18,700 job cuts in Europe since 2003.

Volkswagen, Europe’s biggest automaker, plans to hire workers for a new assembly plant in Russia that will produce 300,000 Skoda Octavia sedans a year, Volkswagen CEO Bernd Pischetsrieder, 58, said Jan. 8 during an interview at the North American International Auto Show in Detroit.

Peugeot Chief Executive Jean-Martin Folz, 59, says the move to the east will continue.

`Center of Gravity’

“The center of gravity of our sales is moving east, while the center of gravity of our production was far in the west,” he said Feb. 8 in Paris, when the company released 2005 earnings.

Peugeot’s western European deliveries dropped 2.1 percent last year to 2.36 million vehicles. Sales in the rest of the world, mainly eastern Europe, the Middle East, South America and China, rose 8.4 percent to 1.03 million vehicles.

The company’s shift to the east is already changing the lives of its workers.

Barry Suddens, 59, took a buyout from Peugeot in May 2005 after working at its Ryton, England, plant for 20 years. He left with 55,000 pounds ($95,816) in hand and a pension of 917 pounds a month. Peugeot cut a total of 1,600 jobs at the Ryton plant in 2004 and 2005 through buyouts and early retirements, leaving about 2,000 workers at the factory.

Suddens says that since leaving Peugeot he has had 73 interviews for jobs ranging from stacking boxes at a warehouse to filling shelves at the local Tesco Plc supermarket, without an offer. He now volunteers to lead groups of schoolchildren on tours of his old factory.

“I planned to get another job,” he says. “I’ve totally given up now.”

Slovak Optimism

Peugeot spent 700 million euros to build its new factory in Trnava, Slovakia, which will employ 3,500 people. It plans to invest an additional 350 million euros to expand the plant’s capacity in 2010, adding 1,800 more jobs. The carmaker had 40,000 applications for the first 3,500 positions.

In 2005, gross monthly wages in the Slovak manufacturing industry averaged $574 (18,088 koruna), compared with $3,259 in the U.K., according to the national statistics offices of the two countries.

Marek Mikus, 24, is four weeks into a five-week training course before he starts his job at the new Peugeot plant.

“I’m very happy I got this job,” says Mikus, who previously worked as a security guard. “Peugeot is a big, stable company, and conditions for work are better here than with someone else.”

Qiu, 28, says he has been working in the engine department at GM’s factory in Shanghai for two years and earns about 3,500 yuan ($434) a month. The average hourly wage for a unionized assembly-line worker at GM plants in the U.S. was $26.35 at the end of last year, according to the United Auto Workers Web site. That’s about $4,200 a month.

No Complaints

Qiu says he’s satisfied with his pay. “There’s nothing to complain about,” he says.

It’s not just the low wages that make emerging markets attractive. Factory jobs follow sales growth, says Global Insight’s Griffiths.

“I don’t hate those people for those jobs moving over there,” says former GM employee Spain. “Those people are going to scramble for those jobs. I don’t blame them. But I walk through the plant, and it just about rips my heart out.”