Ford's Wager on Romania

Ford Motor Co. looks set to become the proud owner of a former Daewoo factory in Craiova, Romania. Last month Ford submitted a bid for the Romanian plant including plans to invest some 675 million euros ($920 million). Other bidders including General Motors, China’s Chery and India’s Tata Motor have dropped out of the contest, so Ford looks like the defacto winner. The Romanian government wants to seal the deal in September.

But will an aging ex-Daewoo plant on the southeastern fringe of Europe help Ford expand its global footprint? Some speculate that Ford’s Romanian wager is part of a strategy to morph its European operations into two coherent units – one in eastern Europe building cars mainly for emerging markets and one in western Europe, catering to more prosperous mass-market customers.

Sound familiar? If true, Ford would be following in the well-laid tracks of Renault. France’s Renault took over the bankrupt Romanian automaker Dacia in 2001 and produced an instant emerging market hit with the Logan, a sturdy, modern no-frills car that starts at 6000 Euros. The success of the Romanian-built Logan, launched in 2004, has transformed Renault into an emerging market pioneer. Renault CEO Carlos Ghosn is rapidly cloning Logan factories with partners in India, Russia, and Morocco, soon to be followed by Iran and Brazil. The ambitious Ghosn is gunning for sales of the Logan family of cars to reach 1 million by 2010.

Renault’s clever play in Romania is sure to have encouraged Ford to go east. But how Ford leverages its bet on Romania — a strategy still under wraps — will reveal much about its global edge.

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