Ford to stop making vehicles in India amid mounting losses and poor sales
Ford India will cease to manufacture vehicles in India, but will retain the engine making and technology services business (Global Business Services) as part of scaling down and restructuring the India operations. Approximately 4,000 employees are expected to be affected by the restructuring.
The move was prompted by the mounting losses and slowdown in India’s passenger vehicle market which was further accentuated by the pandemic, Anurag Mehrotra, president and managing director, Ford India told reporters at a virtual press meet on Thursday.
“I would like to reiterate, we are not exiting India. This is a restructuring of our business,” he said.
Ford had been mulling over the way forward for the Indian market even before it had initiated discussions with Mahindra & Mahindra. It arrived at the decision to cease manufacturing after considering all possible options including contract manufacturing, he added.
It is the third global automaker from the US, after Harley Davidson and General Motors, that has significantly reduced its India operations in less than five years amid poor sales, high operating losses, high fixed costs and a market that has failed to live up to the parent company’s expectations.
“As part of our Ford+ 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,” said Jim Farley, Ford Motor Company’s president and CEO. Despite investing significantly in India, Ford 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, said Farley.
With the restructuring the Michigan-based company expects to create a sustainably profitable business in India. As part of the plan, Ford India will wind down vehicle assembly in Sanand, Gujarat by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022. But the company will continue to provide customers in India with ongoing parts, service, and warranty support.
It will stop selling current products such as Figo, Aspire, Freestyle, EcoSport and Endeavour once existing dealer inventories are sold. Ford would continue full customer support operations for these vehicles with service, aftermarket parts and warranty, it claimed.
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 company said.
Mehrotra said Ford plans to bring models from the Mustang family including Mustang Mach-E and other high end premium models through the imported route. It also plans to double down the business at GBS that employs close to 11,000 people in India, the second highest outside the US.
The company will focus on growing its FBS capabilities and team in the country, as well as engineering and engine manufacturing for export. It plans to expand to provide more opportunities for software developers, data scientists, R&D engineers, and finance and accounting professionals, in support of the Ford+ plan to transform and modernize Ford globally, the company said.
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.
In connection with this announcement, Ford currently expects to record pre-tax special item charges of about $2.0 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.
