Losses pressure American auto giant to restructure
American auto heavyweight Ford will restructure its operations in India with plans to significantly expand its Chennai-based Ford Business Solutions team and bring to market some of its iconic global vehicles and electrified SUVs.
Ford says it will continue to provide customers in India with ongoing parts, service, and warranty support.
But the plan, announced 9 Sept 2021, will see Ford India 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.
Following accumulated operating losses of more than US$2 billion over the past 10 years and a US$800 million non-operating write-down of assets in 2019, the restructuring is expected to create a sustainably profitable business in India.
Ford 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.
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.
Ford will begin importing and selling must-have, iconic vehicles, including Mustang coupe. Also, customers in India will benefit longer term from the company’s plan to invest more than US$30 billion globally to deliver all-new hybrid and fully electric vehicles, such as Mustang Mach-E.
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.
“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 US$2 billion of operating losses over the past 10 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,” said Farley.
“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,” assured Anurag Mehrotra, president and managing director of Ford India.
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.
“Despite these efforts, we have not been able to find a sustainable path forward to long-term profitability that includes in-country vehicle manufacturing,” Mehrotra said. “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 will work closely with employees, unions, suppliers, dealers, the government and other stakeholders in Chennai and Sanand to develop a fair and balanced plan to mitigate the effects of the decision.
Ford India 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.
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.
“We are grateful to our dedicated team in India who have undertaken many actions in recent years in an attempt to position the company for profitability and growth,” said Steven Armstrong, transformation officer, South America and India. “Our ability to refocus our presence in India is a result of their building our expertise in low-cost engineering, global engine manufacturing quality and business services.”
In connection with this announcement, Ford currently expects to record pre-tax special item charges of about US$2 billion, including about US$600 million in 2021, about US$1.2 billion in 2022 and the balance in subsequent years. Within that total will be about US$300 million of non-cash charges, including accelerated depreciation and amortization. The remaining cash charges of about US$1.7 billion will be paid primarily in 2022 and are attributable to settlements and other payments.
Ford Motor Company (NYSE: F) is a global company based in Dearborn, Michigan, that is committed to helping build a better world, where every person is free to move and pursue their dreams. The company’s Ford+ plan for growth and value creation combines existing strengths, new capabilities and always-on relationships with customers to enrich experiences for and deepen the loyalty of those customers. #manufacturing #investment #economy /fiinews.com
