Ford, Toyota insist they will maintain investments in Thailand despite strengthening baht
March 27, 2013 00:00
By Matavee Tunrungwetjarun
Major auto-makers have expressed a commitment to maintaining their investments in Thailand despite the baht's appreciation.
Alan Mulally, president and chief executive officer of Ford Motor Company, said the US giant would not relocate its manufacturing facility from Thailand despite the strengthening of the baht.
“The current strong baht has not had any effect on the investment of Ford in Thailand, and we have no plan to relocate our production from Thailand. We have been in Thailand for 15 years. The company last year invested about Bt14 billion into its Ford Thailand Manufacturing [FTM] plant in Rayong province,” he said.
Ford is recognised as one of the biggest investors in Thailand, operating two major factories in Rayong with a combined capacity at 450,000 cars per year. FTM is Ford’s second plant in the Kingdom and one of nine plants to be opened by the company by the end of 2015. Mulally described Asia-Pacific as a high-growth region, accounting for between 60 and 70 per cent of the company’s worldwide sales. In Asean as a whole, Ford enjoyed record growth of 27 per cent with 87,623 cars being sold last year.
“We will focus on launching new vehicle models in every segment, together with continuous expansion of our showrooms and service centres in Thailand,” he added.
Toyota Motor Thailand, which annually exports nearly 500,000 vehicles from three plants in Thailand, will have to devise plans to cope with the baht’s appreciation, said president Kyoichi Tanada.
At the current level, the company has not yet been financially affected, he said.
At a press conference to launch the new Vios on Monday, Tanada said the company had tried to lower its production costs as much as possible, through cooperation with suppliers. However, if the baht keeps strengthening, Toyota will need to ask the government to step in.
“The exchange rate of 31 per US dollar is favourable, and 30 is acceptable, but 29 would cause trouble since there would be no benefits or profits,” he said in an interview last September.
Toyota has three assembly plants in Thailand with a combined production capacity of 800,000 units. It also has plants in Indonesia (150,000 units/year), Malaysia (70,000), the Philippines (30,000) and Vietnam (30,000).
The company will raise its production capacity in Thailand to 880,000 units per year by restoring production at the Thai Auto Works plant and building a second plant at the Gateway Industrial Park.
Meanwhile, Bank of Thailand Governor Prasarn Trairatvorakul assured Japanese investors that the central bank stood ready to expedite measures to stem what he called the “overshooting” exchange rate and “excessive” capital inflows.
At the Japanese Chamber of Commerce’s dinner talk on Monday, Prasarn stressed the big challenge for the authorities in balancing policies.
On dollar/baht movement, he said the Thai currency had been on an appreciating trend due to various factors, including capital flows surging into the region, structural change in the world economy, the growth differential between advanced and emerging economies, and accommodative monetary policy in advanced economies.
However, the strong baht is supportive for the upgrade of technology and productivity, to shift from labour-intensive to capital-intensive industries, he added.
“So, as the first line of defence, the exchange rate should be determined by the market mechanism and, from both the market and our own assessment, the baht still remains broadly in line with economic fundamentals. However, the central bank stands ready to use policy instruments at our disposal to prevent and manage dysfunctional market conditions, excessive speculation or exchange-rate overshooting,” he said.
The baht dropped yesterday to 29.35 per dollar as of 3.12pm, on speculation that Japanese companies in Thailand are sending profits home before the end of the fiscal year on March 31.
“We have a lot of Japanese companies in Thailand and this is the end of their fiscal year, so Japanese companies sending money back home puts some downward pressure on the baht,” Pareena Phuangsiri, a Bangkok-based analyst at Kasikornbank, told Bloomberg.