JK's AIA Presentation

1
AFTA Turning the ASEANDream Into Reality
AFTA 2002 Symposium Jakarta, Indonesia January
31, 2002 John Parker President, ASEAN
Operations Ford Motor Company
2
The Automotive Industry Imperative
The foundation of sustainability in the auto
industryis global competitiveness, which is a
functionof continued liberalization
Product DesignAnd Development
IntegratedManufacturing
ASEANToday
Low Value-added Limited Exports Low Technology
CKD
National
Global
Regional
Stages of Liberalization
3
ASEAN Auto Growth A Strong Recovery

• Strong Recovery after Crisis, but lags China in
  overall size.
• ASEAN Industry Size Only Competitive if Viewed as
  One Region

4
Auto Manufacturers Have Invested Heavily in ASEAN
since 1995
Millions US ()
BUT
5
Manufacturing Rationalization starts in 2003Is
it AFTA or the Thai-Phil-Indo FTA?
VIETNAM ?
Source Press Reports
6
When Will Malaysia Join AFTA? Uncertainty
Jeopardizes Regional Integration

• Largest Mid-size Car Market in ASEAN (Represents
  35 of ASEAN Vehicle Market).
• 5 AFTA Duty for CBU Deferred Until 2008 (5 years
  later than Thailand and Philippines and 6 years
  later than Indonesia).
• Malaysia Could Be Integral Part of Regional
  Production
• But investment decisions for 2005 are being made
  today.
• Damages Investor Confidence in All of ASEAN
• Gives Economies of Scale Leadership to China

7
CBU AICO A Great Example of Forward Thinking
Delivering Investment into ASEAN
Ford Thailand
Ford Philippines
PARTS

• BENEFITS
• Eliminates Duplicative Vehicle Assembly and
  Supply Bases.
• Major (Multimillion Dollar) Investment in Both
  Countries for New Products, possible because of
  Greater Economies of Scale.
• Sneak Preview into AFTA product
  complementation, plant rationalization, economies
  of scale.

8
Reality Chinas Diverting Investment Dollars
From ASEAN
38 ofAsia FDI
61 ofAsia FDI
Source United Nations(Jan. 2002)
18 ofAsia FDI
9 ofAsia FDI

• Consider
• China took 15 of Automotive FDI in 1990 but that
  number increased to 64 in 2000.
• Globally, FDI dropped almost 50 in 2001.
• According to JETRO, 8 of Japanese MNCs will
  relocate from ASEAN to China in 2002 because of
  WTO accession.

9
With WTO Accession, China Will Increase
Exportsto Member Countries
SourceUBS Warburg
Unless AFTA is implemented for the auto industry
on time in all countries, China will continue to
attract more automotive FDI and will soon start
to EXPORT.
10
What ASEAN Should do to Position for Future Growth

• AFTA is key Regional Tariffs Must Come Down
• Most Critical Aspect of Growing Volume.
• Malaysias Delay Closes the Largest Passenger Car
  Market in ASEAN to Regional Integration Until
  2008.
• Meet WTO TRIMs Obligations Now
• Continuing TRIMs in Malaysia and Philippines
  Slows Down Global Competitiveness in Component
  Manufacturers and Prevents Regional Sourcing
  Integration for Components and Parts.
• Harmonize Vehicle Emissions/Safety Standards
• Harmonize External MFN Tariffs
• Will Result in Lower Cost CKD Imports China
  Drops to 10 in 2006!
• Modernize Vehicle Tax Policies
• Current Structures Actively Suppress and Distort
  What Consumers Want.

11
AFTA Turning the ASEAN DreamInto Reality
Thank You