Ford Motor Company (NYSE:F) said on Tuesday that it will invest $195 million in a new global technology and business center in Chennai, India, creating 3,000 jobs.
What Ford said
Ford said that its new center will "serve as a hub for product development, mobility solutions, and business services for India and the world." A new 28-acre "environmentally friendly campus" incorporating solar panels and water-recovery systems will house a total of 12,000 employees, 3,000 of whom will be new "highly skilled" workers, it said.
The remaining 9,000 employees will be consolidated from six existing Ford facilities in Chennai. The facility will be Ford's second-largest center of employment anywhere in the world, after its world headquarters in Dearborn, Michigan.
Ford expects the facility to be completed in 2019.
Background: Ford has been searching for growth in India
As part of a big push to expand in Asia, Ford announced in 2011 that it would build two major manufacturing sites in India. Mindful that Ford was late to the booming Chinese market, then-CEO Alan Mulally wanted to make sure that the Blue Oval had a presence in what he thought might be the next emerging market to, well, emerge.
But India's new-car market didn't expand as expected, and the sales growth that Ford had planned the factories around didn't materialize. Ford had built factories capable of making 440,000 vehicles a year -- but the Indian market was buying fewer than 150,000 of them. That led Ford to announce a switch to an export-focused strategy in 2013 -- but CEO Mark Fields said in September that that hasn't worked out so well, either:
We've set up India as an export base for small vehicles. However, our market performance and our financial performance has not met our expectations, so we are in the process of reevaluating our strategy and our business model for India.
What might that mean? Fields dropped a hint: "Our new mobility business could be a factor that plays in there. That's why you saw us about a month ago take an equity position in Zoomcar, which is the largest car-sharing service in India."
This new center is another hint.
Why Ford is building this facility
"India is not only a vibrant market for cars and new mobility ideas, it also is rich with talent, technical expertise and ingenuity," executive chairman Bill Ford said in a statement. "This new center will help us attract the best and brightest, and make Chennai a true hub of innovation for Ford around the world."
The center will be part of Ford's global product-development network, which includes two other centers in its Asia Pacific region as well as centers in the U.S., Germany, and elsewhere. It will also be a center of information-technology expertise, Ford said, helping to "drive innovative ideas for Ford's emerging business models in mobility, analytics, and connected vehicles."
Long story short: It's a way for Ford to tap India's highly educated workforce while raising its visibility in what could eventually become one of the world's largest new-vehicle markets.
John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.