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Ford’s Chinese speed bump

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On the surface, Ford Motor Company ( F , quote ) looks like it is firing on all cylinders with the announcement of a new $490 million plant in the southwestern Chinese city of Chongqing. This is the company's third passenger car plant in China, but all is not necessarily well for the stock.

[caption align="alignright" caption="Glory days: Ford '67 Fastback Mustang"]

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China is the world's biggest auto market measured by the number of vehicles sold, which makes it crucial for Ford to get back on track in a country where it lags General Motors Company ( GM , quote ) and other global rivals.

A look at the numbers:

In 2011, Ford vehicle sales in China reached 519,390 passenger cars and commercial vans. This is an impressive 7% increase from 2010, but falls far short of matching GM's 2.55 million vehicles sold in the same country over the same period.

Ford's partnerships in China:

Ford's new Chongqing factory was approved back in 2009 and currently has joint operations with Chongqing Changan Automobile Co. and Japan's Mazda Motor Corp. ( MZDAY , quote ). The goal is to produce 150,000 cars per year, with the redesigned Ford Focus in particular -- one of 15 new models -- expected to reach China showroom floors in the second quarter.

Unfortunately, there are regulatory issues here as Ford and Mazda are having problems dividing their operations in China into two separate entities.

The proposal would split the venture, with one entity owned 50 - 50 by Ford and Changan and running the Chongqing plant.

The other half of the enterprise would consist of a plant in the Chinese city of Nanjing owned jointly by Mazda and Changan.

The proposal will also move production for the Ford Fiesta from Nanjing to Chongqing.

But analysts have heard that people close to the joint venture are saying the approval process is bogged in government red tape with China's increasingly determined effort to consolidate the country's fragmented auto manufacturing industry.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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