Ford to cease manufacturing vehicles in India: shuts down plants

Ford India has announced that it will cease manufacturing vehicles for sale in India immediately. The manufacturing of vehicles for export will wind down at Sanand vehicle assembly plant by Q4 2021, and Chennai engine and vehicle assembly plants by Q2 2022. 

Sales of current products such as Figo, Aspire, Freestyle, EcoSport and Endeavour will cease once existing dealer inventories are sold.

Following accumulated operating losses of more than $2 billion over the past 10 years and a $0.8 billion non-operating write-down of assets in 2019, the restructuring is expected to create a sustainably profitable business in India.

In a press statement the US based company said that it will work closely with employees, unions, dealers and suppliers to care for those directly impacted. The company said it will serve customers in India with vehicles like the Mustang coupe. Customers in India also 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.

It said that India will remain home to Ford’s second-largest salaried workforce globally. In addition to Ford Business Solutions, Ford India will continue engine manufacturing for export, as well as full customer support operations with service, aftermarket parts and warranty support. 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 plans to significantly expand its 11,000-employee Business Solutions team in India in coming years to support Ford globally; team to focus on engineering, technology, and business operations centres of excellence.

Ford India’s restructuring will advance the Ford+ plan for growth and value creation by strengthening automotive operations and capitalizing on unprecedented opportunities in electric and connected vehicles and enhanced customer experiences.

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.

Ford’s plans for India

Ford 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 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 $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”, he added.

Anurag Mehrotra, president and managing director of Ford India, added: “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.”

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,” he noted.

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.

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.

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.