SHANGHAI/TOKYO - Ford Motor Co. is teaming up with Japanese partner Mazda Motor Corp. on a planned car factory in prosperous eastern China, as the two automakers play catch-up in a hotly contested auto market.
The plant in Nanjing, near China's richest city Shanghai, will be run by Ford's joint venture with Chongqing Changan Automobile Co. Ltd. and is part of a $1 billion expansion plan the Detroit giant unveiled last year.
It will have initial output capacity of about 200,000 units a year, Ford COO Jim Padilla was quoted as saying by a Mazda spokesman.
Other details such as investment and models to be made at the factory will be announced later, spokesmen at Ford and Mazda said.
Changan Ford, the venture between Ford and Changan Auto, signed an agreement on Thursday to buy land for the new factory. It now operates another plant in the city of Chongqing, which is raising annual output to 150,000 units.
The project comes against a backdrop of slowing car sales in China as the government applies the brakes to a racing economy, prompting analysts to say the market may only grow 10 to 20 percent in 2004 versus a near-doubling in 2003.
"Ford and Mazda assemble vehicles in North America, Europe, Africa and Asia," Ford Executive Vice President Mark Schulz said in a statement. "This plant in China is a logical extension of that partnership and has been a strong benefit to both companies."
Ford China spokesman Kenneth Hsu declined to give details on Mazda's role in the project, saying: "The only thing that we can disclose now is Mazda's 'participation' in the project."
"At this point, it's the signing of the investment agreement to obtain the land," Hsu said.
Japanese business daily Nihon Keizai Shimbun reported last month that Mazda planned to take a 12.5 percent stake in Changan Ford for some 40 billion yen ($363.9 million).
Chinese state media has reported the Nanjing plant would make the Mazda3 -- a hot-selling sports compact called the Axela in Japan.
Jointly developed with Ford and Volvo, the car will serve as a basis for the next-generation Ford Focus, a concept version of which was unveiled at the Beijing auto show this year.
The project is now being reviewed by China's government, Ford said, adding approval is expected in the next few weeks.
Mazda and Ford have long said they were looking at ways to cooperate in China.
Mazda, which aims to sell 300,000 cars annually in China by 2010, does not assemble its own cars in the country.
Instead, it licenses manufacturing to two units of FAW Car Co. Ltd., controlled by the country's top vehicle maker First Automotive Works.
Executives at Japan's fifth-largest automaker, one-third owned by Ford, have said local production of their own cars would have to be the next step to expand in the country. Mazda is expected to announce such plans by the end of the year.
Ford, whose first Chinese car factory opened only last year, plans to make 65,000 sedans there this year, less than 1 percent of its global production and about a tenth of rival General Motors in China.
Multinationals such as Ford, GM and Volkswagen AG have unveiled plans to invest some $13 billion in China, tripling capacity to six million cars by the end of the decade, stoking fears of a margin-sapping glut just down the road.
Car sales in China fell for the third straight month in June, industry figures show, as Beijing's efforts to rein in the economy kept buyers at bay and forced makers to cut prices.