Ease of Doing Business for MSMEs: The estimated turnover loss for some of the MSMEs in Tamil Nadu supplying to Ford is expected to be from 20 per cent to 40 per cent, however, the conclusive data is yet to be gathered from all state MSMEs working with Ford to understand the overall impact of the Maraimalai Nagar (near Chennai) plant’s closure announced by the company, a senior official in the MSME department of the Government of Tamil Nadu told Financial Express Online on anonymity.
On Wednesday, Rural Industries minister TM Anbarasan chaired a meeting at the City and Industrial Development Corporation (CIDCO) office in Chennai with MSME and large suppliers of Ford in the state to the latter’s Chennai plant to discuss the possible impact.
“There were about 75 large enterprises from Tier-I regions and another around 75 small businesses from Tier-I and Tier-II cities supplying directly or indirectly to Ford. Based on the informal information collected prior to the meeting with the minister, around 8,000 employees were employed with MSMEs in both tiers. They were asked about the estimated business impact from the loss of order to Ford and job losses as well,” the official added.
While some of the businesses said the effect would be around 20 per cent loss of turnover, few others noted that the impact to be around 40 per cent, the official said. According to him, once the data from all MSMEs and other businesses is collected in around two weeks, the state government will assess the overall impact to see what kind of support could be offered.
Ford had earlier this month announced it will cease manufacturing vehicles for sale in India “immediately”. The manufacturing of vehicles for export will wind down at Sanand (Gujarat) assembly plant by Q4 2021, and Chennai engine and vehicle assembly plants by Q2 2022. This means EcoSport, Figo, and Aspire models won’t be manufactured now in India. The restructuring would affect around 4,000 Ford factory employees.
According to the Tamil Nadu government, Ford is looking at a resettlement package for Tamil Nadu factory employees. During the review meeting on Wednesday, Anbarasan had said that the company is looking to have a settlement package, the official added.
Subscribe to Financial Express SME newsletter now: Your weekly dose of news, views, and updates from the world of micro, small, and medium enterprises
Earlier in September, the Federation of Automobile Dealers Association (FADA) had said that around 170 Ford dealers have around 391 outlets across India and have invested around Rs 2,000 crore so far for setting up their dealerships. The investment is at stake now.
“While Ford India employs 4,000 people, dealerships employ around 40,000 people without displacing them from their home locations thus being continuously skilled and up-skilled all this while. Ford India Dealers currently hold around 1,000 vehicles which amount to around Rs 150 crore via inventory funding from reputed Indian banks. They also carry demo Vehicles which are 100s in numbers. Moreover, Ford India also appointed multiple dealers until five months back. Such dealers will be at the biggest financial loss in their entire life,” the association had said.
Vinkesh Gulati, an automobile dealer based out of Allahabad and Faridabad said the average investment in a new dealership is Rs 6-8 crore while smaller outlets require Rs 2-4 crore. “Rs 2,000 crore at stake is an average. According to the dealers, on average, investment in a new dealership is around Rs 6-8 crore and around Rs 2-4 crore in a smaller outlet. Practically all dealers are MSMEs who now have concerns around their business impact,” Gulati told Financial Express Online.
While the eventual impact on MSMEs working with Ford is yet to be fully ascertained, the benefit to dealers of other automobile manufacturers, as Ford shuts its plants, is also not significant. “Benefit to other dealers would be minimal as Ford didn’t have a big market share in India, selling around 3,000 vehicles all India. This wouldn’t trickle down to such a big thing that any other dealer could benefit out of it,” added Gulati who is also the President of FADA and runs United Automobiles.
However, Ford had said that it will still maintain a smaller network of suppliers as it will continue engine manufacturing for exports and will “work closely with other suppliers to ensure a smooth wind-down of vehicle manufacturing.”