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Following accumulated operating losses of more than $2 billion over the past ten years and a $0.8 billion non-operating write-down of assets in 2019, American car manufacturer Ford in India on Thursday announced that it is closing down its vehicle manufacturing operations at its Chennai and Sanand facilities in the county.
However, it will retain its engine plant in Sanand, which produces engines for export for the best-selling Ranger pickup truck. Ford will begin importing and selling must-have, iconic vehicles, including the Mustang coupe.
Approximately 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.
As part of the plan, Ford India will wind down vehicle assembly in Sanand by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022. Instead, the company will focus on growing its Ford Business Solutions capabilities and team in the country and engineering and engine manufacturing for export.
Sales of current products such as Figo, Aspire, Freestyle, EcoSport and Endeavour will cease once existing dealer inventories are sold.
Ford will continue to provide customers in India with ongoing parts, service, and warranty support, the company said in a press statement.
Ford India will maintain a smaller network of suppliers to support engine manufacturing for exports and work closely with other suppliers to ensure a smooth wind-down of vehicle manufacturing. Ford 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.
With more than 11,000 team members currently in India, Ford Business Solutions plans to expand to provide more opportunities for software developers, data scientists, R&D engineers, and finance and accounting professionals, supporting the Ford+ plan to transform and modernise the company globally.
Ford India 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.
Jim Farley, President and CEO, Ford Motor Company, said, “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. Despite investing significantly in India, Ford has accumulated more than $2 billion of operating losses over the past ten years and demand for new vehicles has been much weaker than forecast.”
“I want to be clear that Ford will continue taking care of our valued customers in India, working closely with Ford India’s dealers, all of whom have supported the company for a long time. India remains strategically important for us and, thanks to our growing Ford Business Solutions team, will continue to be a large and important employee base for Ford globally,” he added.
Anurag Mehrotra, President and Managing Director, Ford India, said, “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.”
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 amortisation. The remaining cash charges of about $1.7 billion will be paid primarily in 2022 and are attributable to settlements and other payments.