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Ford surges, but what if it had said 'yes' in 1924?

 

Ninety years ago, Ford Motor Co passed up a chance to become China's favorite brand. Today, its effort to rectify what must stand as one of the most unfortunate decisions in automotive history is finally paying off.

The US auto maker on Monday posted a 49 percent surge in China sales for 2013, overtaking Japan's Toyota Motor Corp as China's fifth-largest foreign auto brand. The Dearborn, Michigan company sold a record 935,813 vehicles in the country last year, while Toyota's sales climbed 9.2 percent to 917,500.

For much of the past decade in China, Ford had trailed Toyota as well as the two leading foreign brands, Detroit arch-rival General Motors Co and Germany's Volkswagen AG. The popularity of Ford's top-selling Focus compact car and anti-Japan sentiment tied to China's dispute with Japan over islands in the East China Sea helped Ford's annual sales to top Toyota's for the first time. Ford also is pouring $4.9 billion into doubling its China manufacturing capacity.

"Ford had a kick-ass year," wrote an analyst on the Seeking Alpha investment website. "Forward thinking" moves such as Ford's 2009 announcement that it would invest $500 million in a new plant in China, will "continue to propel Ford's growth through 2014." He raved over Ford's ability to market its vehicles "seamlessly with the Chinese auto market". Ford has been in catch-up mode in China for years because it formed its first joint venture in the country six years after GM and more than a decade after VW.

There was a time when Ford could have had China all to itself. In 1924, according to recently released correspondence from the archives of the Henry Ford Museum, Sun Yat-sen, the father of modern China, invited company founder Henry Ford to south China to create a "new industrial system" that would be even larger than Ford's US operations in the US. A Ford lackey issued a blunt rejection, saying, "Mr. Ford has made no plans for visiting China in the very near future".

Sun, a medical doctor and revolutionary who briefly became the first president of China in 1912, wanted to get help for his then-struggling country. Read today in the context of China's unprecedented growth and its emergence as a global manufacturing giant through its use of the assembly line-system that Ford himself perfected, Sun's words from a letter dated June 12, 1924, come across as strikingly humble:

"I know and I have read of your remarkable work in America," Sun wrote in a letter released by Ford Motor in October ahead of the company's application to become a government-approved provider of taxis in Hong Kong. "And I think that you can do similar work in China on a much vaster and more significant scale." Sun wrote that "in a sense it may be said that your work in America has been more individual and personal". In China, he promised Ford, "you would have an opportunity to express and embody your mind and ideals in the enduring form of a new industrial system".

Sun wrote that it was "more or less hopeless to expect much" from the Allied nations that won World War I. "There is much more to hope, in my opinion, from a dynamic worker like yourself."

After Ford turned down Sun's invitation, China would suffer through decades of poverty, turmoil and famine. Ford's automobile company, on the other hand, would reach a peak along with the rest of Detroit at the forefront of a golden age of US manufacturing. As the US market became crowded with foreign-made automobiles, particularly energy-efficient vehicles from Japan, Ford's sales and market share would erode. By 2009 a newly wealthy and powerful China would overtake the US as the world's largest automotive market by sales.

The turning point in Ford's China relationship would come in 2006 when company CEO Alan Mulally and Executive Chairman Bill Ford would set a plan to bolster the company's Asia presence. Under Mulally's watch, Ford's market share in Asia would grow from 2 percent at the end of his first full year in charge to 3 percent by mid-2013. By 2015, Ford aims to capture 6 percent of the China market not an unreasonable goal, given demand for SUVs and the high number of first-time buyers in China, Citigroup Inc analyst Itay Michaeli recently wrote.

One can only wonder how much greater Ford's market share in China might be today had Henry Ford accepted Sun's invitation to help China organize its industrialization.

 

 

 
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