Facing mounting losses, US car major Ford Motor Company has decided to cease local vehicle manufacturing in India. As part of its India restructuring plan, the company will also stop manufacturing vehicles for export and will wind down the Sanand vehicle assembly plant by the fourth quarter of 2021 and Chennai engine and vehicle assembly plants by the second quarter of 2022. Ford said that despite investing significantly in India, the company has accumulated more than $2 billion of operating losses over the past 10 years and demand for new vehicles has been much weaker than forecast. This was the second major exit of local manufacturing operations in India by a global automotive brand. US giant General Motors had stopped selling cars in India in 2017.
Close to 4,000 employees are expected to be affected by the restructuring. Ford will work closely with employees, unions, suppliers, dealers, government, and other stakeholders in Chennai and Sanand to develop a fair and balanced plan to mitigate the effects of the decision. The sales of current products such as Figo, Aspire, Freestyle, EcoSport and Endeavour will cease once existing dealer inventories are sold. Ford will continue full customer support operations for these vehicles with service, aftermarket parts and warranty coverage.
Ford plans to serve customers in India with its global range of iconic vehicles, including the Mustang coupe. Customers in India also will benefit longer term from the company’s plan to invest more than $30 billion globally to deliver new hybrid and fully electric vehicles, such as Mustang Mach-E, the company said. As part of the restructuring plan, Ford said it will significantly expand its Chennai-based Ford Business Solutions team and bring to market some of Ford’s iconic global vehicles and electrified SUVs while ceasing vehicle manufacturing in India.
Ford will continue to provide customers in India with ongoing parts, service, and warranty support. Following accumulated operating losses of more than $2 billion over the past 10 years and a $0.8 billion non-operating write-down of assets in 2019, the restructuring is expected to create a sustainably profitable business in India, it said. Jim Farley, Ford Motor company’s president and CEO, said: “As part of our Ford plus plan, we are taking difficult but necessary actions to deliver a sustainably profitable business longer-term and allocate our capital to grow and create value in the right areas.”
More than 500 employees at the Sanand Engine plant, which produces engines for export for the best-selling Ranger pickup truck, and about 100 employees supporting parts distribution and customer service, also will continue to support Ford’s business in India. Anurag Mehrotra, president and managing director of Ford India, said: “Ford has a long and proud history in India. We are committed to taking care of our customers and working closely with employees, unions, dealers and suppliers to care for those affected by the restructuring.”
Ford said it took these restructuring actions after investigating several options, including partnerships, platform sharing, contract manufacturing with other OEMs, and the possibility of selling its manufacturing plants, which is still under consideration. “Despite these efforts, we have not been able to find a sustainable path forward to long-term profitability that includes in-country vehicle manufacturing. The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market,” Mehrotra said.
The company will maintain parts depots in Delhi, Chennai, Mumbai, Sanand and Kolkata and will work closely with its dealer network to restructure and help facilitate their transition from sales and service to parts and service support. Also, Ford will maintain a smaller network of suppliers to support engine manufacturing for exports and will work closely with other suppliers to ensure a smooth wind-down of vehicle manufacturing. Ford also will continue to rely on India-based suppliers for parts for its global products, and suppliers and vendors supporting Ford Business Solutions will continue to support the business as normal.
In connection with this announcement, Ford currently expects to record pre-tax special item charges of about $2 billion, including about $0.6 billion in 2021, about $1.2 billion in 2022 and the balance in subsequent years. Within that total will be about $0.3 billion of non-cash charges, including accelerated depreciation and amortization. The remaining cash charges of about $1.7 billion will be paid primarily in 2022 and are attributable to settlements and other payments.