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Ford Opens New China Plant as Analyst Cites China Spending Rise

CHONGQING, CHINA ( TheStreet) -- Continuing its growth in China, Ford (F - Get Report) opened a $500 million engine plant in Chongqing on Wednesday, a sign of its increasing presence -- and increasing spending -- in the world's largest automotive market.

Meanwhile, GM (GM - Get Report) broke ground for a new $1.3 billion Cadillac plant in Shanghai's Jinqiao zone, hoping to increase the sale of luxury vehicles in China.

The Ford, a joint venture with Changan Ford Automotive, has an initial annual capacity of 400,000 engines. It will produce 1.0-liter three-cylinder EcoBoost and 1.5-liter four-cylinder engines. That more than doubles Changan Ford's annual production capacity of 350,000 units.

"The engines produced here and the process by which they are manufactured represent the latest in sustainable and green manufacturing processes," said CEO Alan Mulally, who is traveling in Asia this week, in a prepared statement. "The 1.5 and 1.0 liter engines produced will help power Ford's continued growth here in the world's largest automotive market."

Ford shares closed Tuesday at 15.65, up 10 cents. Year to date, the shares are up 18%. On Monday, Standard & Poor's Capital IQ analyst Efraim Levy lower his rating to "hold" from "buy," while raising his 12-month target by $2 to $17.

"While we see significant volume growth in China, income should be restrained by expansion-related costs in that and other emerging markets," Levy wrote. He said an increase in U.S. profits, fueled by rising demand for pickup trucks, will be offset by sizable European losses in 2013, although those losses should diminish in 2014.

The GM plant will have a capacity of 160,000 vehicles a year. GM is the market leader in China but trails other automakers including BMW in the luxury market.

"Rising incomes per capita are going up. China's a great market," said GM CEO Dan Akerson, The Associated Press reported. "We're going to bring our high-end premium product here and we're going to see how we run against the competitors from Europe and Japan."

The new Ford plant, located in Lijia in Chongqing's New Northern Zone, is the second of five plants Ford will open in China this decade, and the second of seven Ford will open in the Asia Pacific region. "This kind of expansion is nearly unprecedented," Mulally said.

Ford China sales rose 45% in May. In the first five months of the year, Ford China sales rose 48% to 332,467 units.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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