VZCZCXYZ0004
PP RUEHWEB

DE RUEHIT #0047/01 0361212
ZNR UUUUU ZZH
P 051212Z FEB 10
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 9497
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASH DC PRIORITY
INFO RUEUITH/ODC ANKARA TU PRIORITY
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/DIA WASHDC PRIORITY

UNCLAS ISTANBUL 000047 
 
SENSITIVE 
SIPDIS 
 
DEPT PLEASE PASS USTR 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD EFIN PGOV PREL TU
SUBJECT: FORD OTOSAN,S SUCCESSFUL U.S. - TURKISH TRADE 
VENTURE 
 
REF: ANKARA 145 
 
¶1. (SBU)  Summary:  The Ambassador,s recent visit to a Ford 
Otosan plant near Istanbul showcased the Ford-Koc 
joint-venture,s production of the Transit Connect, a U.S. 
market export that was recently named &2010 Truck of the 
Year8.  Otosan is Turkey,s largest industrial exporter and 
one of its biggest contributors of tax revenue.  Otosan,s 
plants feature many of Turkey,s competitive advantages ) 
production efficiency, reliable labor force, good 
transportation links ) but possible expansion plans hinge in 
part on whether the GOT can meet Ford,s expectations on 
incentives.  Otosan,s operations are a shining success story 
in a bilateral economic relationship that remains modest 
relative to the size of our economies.  End Summary. 
 
FORD-KOC JOINT VENTURE PLANTS IN KOCAELI, GEBZE 
 
¶2. (SBU)  On January 26, Ambassador, Istanbul Consul General, 
and Commercial Officer visited the Ford Otosan factory in the 
northeastern city of Kocaeli, about 100 miles from Istanbul. 
Ford Otosan is a joint-venture between the Turkish Koc Group 
and Ford. The Kocaeli plant is a state of the art, highly 
robotized facility that opened in 2001.  Since then, it has 
produced full-sized Transit vans and the compact Transit 
Connect for 25 markets.  Annual production passed 300,000 
units before the global financial crisis reduced production 
to 180,000 units.  With 80 percent of those vehicles leaving 
Turkey, it is the nation,s largest industrial exporter and 
one of its biggest sources of tax revenue. Ford Otosan also 
has a plant in the city of Gebze near Istanbul.  The 
relationship between Ford and Koc, Turkey,s largest holding 
company, started in 1928 with a dealership arrangement which 
has now developed into a joint venture with 41 percent Ford 
equity, 41 percent Koc equity, and 18 percent publically held 
common stock.  Ford Otosan employs over 7,600 workers and has 
registered over $4.8 billion USD in sales. Profits are shared 
between Ford and the Koc Group. During the visit, U.S. 
Mission officials were given a tour of the production 
facility that assembles the Transit and Transit Connect 
vehicles. The Transit Connect is the first Turkish-made 
vehicle to be ever exported to the U.S.  Turkish Prime 
Minister Erdogan drove the first vehicle into the ship bound 
for U.S. markets in a ceremony last May. 
 
U.S. &TRUCK OF THE YEAR8 MADE IN TURKEY 
 
¶3. (SBU) Ford started exporting the Transit Connect to the 
U.S. in May 2009 and sent 30,000 of the vehicles there by the 
end of 2009, generating $300 million in sales.  In 2009 the 
plant also produced 72,000 Transits and an additional 27,000 
Transit Connects for European and domestic markets. The 
Transit Connect received the &2010 Truck of the Year8 award 
in January at the Detroit Motor Show.  The vehicle fills a 
previously unfilled niche in the U.S. market for a fuel 
efficient compact van created by a shift in commercial 
buyer,s behavior favoring smaller, more fuel-efficient 
vehicles. 
 
WHY PRODUCE IN TURKEY? 
 
¶4. (SBU) According to plant manager Michael Flewitt, Ford 
chose to produce the U.S. market,s Transit Connect in Turkey 
because of the Kocaeli plant,s award-winning efficiency, 
productive workers, and location close to sea transportation 
links.  The cost of shipping the vehicles to Baltimore adds 
only $300 to its price.  Since the vehicle is actually 
considered a passenger vehicle under U.S. customs tariff 
rates, it only faces a 2.5 percent customs duty versus a 25 
percent duty for imported trucks. 
 
POSSIBLE BUMPS IN THE ROAD 
 
¶5. (SBU) Despite the success of the Ford Otosan Transit 
Connect operations, possible pot holes lie ahead. In order to 
meet Ford,s global increase in demand, Flewitt advised, Ford 
is considering doubling its Kocaeli plant by building another 
factory on a green field plot next to the existing plant. 
However, Ford is also evaluating sites in other countries 
whose governments may provide additional incentives or cost 
sharing in the preparation of the site.  Ford officials have 
expressed frustration that the GOT has not been forthcoming 
 
with an incentive package attractive enough to encourage Ford 
to proceed with the construction of another plant in Turkey. 
Ford may also move production of Transit Connect vehicles 
intended for the U.S. market to the U.S. if production is 
expected to surpass 150,000 units.  Such volume makes it more 
profitable to produce the vehicle in the target market. 
 
¶6. (SBU) Comment:  Ford,s production of durable, high value 
goods in Turkey for U.S. and European markets stands as a 
showcase success in the bilateral economic relationship.  It 
demonstrates that Turkey can offer a sturdy export platform 
for U.S. investment; however, no template exists for success 
in such activities and profitable U.S. investments in Turkey 
are often marked by unique circumstances.  In Ford,s case, 
success was built on a long relationship with the Koc group, 
a powerful industrial partner, and encouraged by Turkey,s 
proximity to European markets.  Other U.S. companies have 
developed profitable production and trade operations in 
Turkey as well, but psychological and practical impediments 
continue to keep the bilateral economic relationship smaller 
than expected for the world,s largest and 16th largest 
economies ) a central challenge for upcoming engagements 
under the Framework for Strategic Economic and Commercial 
Cooperation (FSECC). 
 
¶7. (SBU) Another USG task in FSECC engagements will be to 
highlight the pivotal contributions U.S. investment like 
Ford,s makes to the Turkish economy ) contributions that 
are often underappreciated by a GOT that obsesses about 
Turkey,s &unfavorable8 balance of trade with the 
U.S.(reftel).  In Ford,s case, for example, the employment, 
domestic consumption, tax revenue, and exports to European 
markets generated by its investment are not credited to &the 
U.S. account8 but yield substantial dividends to the Turkish 
economy.  End Comment. 
 
WIENER