NEW DELHI: US carmaker Ford will stop manufacturing vehicles in India due to accumulating losses ($2 billion).
With this, Ford becomes the second American carmaker, after General Motors, to exit the Indian market in recent years. Ford has two manufacturing plants in India -- one in Sanand and one in Chennai. Its decision to shut shop here will impact around 4,000 employees.
Sales of current products such as Figo, Aspire, Freestyle, EcoSport and Endeavour will cease once existing dealer inventories are sold.
"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."
He added, "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."
Ford will continue to provide customers in India with ongoing parts, service, and warranty support, the company said. 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.
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.
Ford Motor and India's Mahindra & Mahindra (M&M) had in 2018 formed a partnership to co-develop midsize and compact SUV, electric vehicle and connected car solutions. The two then decide to end their automotive joint venture in January 2021, citing changes in global economic and business conditions partly due to the coronavirus pandemic.
"Despite these efforts, we have not been able to find a sustainable path forward to long-term profitability that includes in-country vehicle manufacturing," said Anurag Mehrotra, president and managing director of Ford India. "The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market."
Approximately 4,000 employees are expected to be affected by the restructuring. Ford said it 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.
Ford added it will focus on growing its Ford Business Solutions capabilities and team in the country, as well as engineering and engine manufacturing for export. "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, in support of the Ford+ plan to transform and modernize Ford globally," the company said.
Ford also said it will begin importing and selling must-have, iconic vehicles, including Mustang coupe. Customers in India also will benefit longer term from the Company's plan to invest more than $30 billion globally to deliver all-new hybrid and fully electric vehicles, such as Mustang Mach-E.
Ford India 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 $2.0 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, the company said.