Ford Motor Company on 9th September 2021 said it is “forced” to end manufacturing operations in India and close plants at Sanand and Chennai because of “huge accumulated losses and lack of growth in a difficult market”.
Ford will end the manufacturing of vehicle for exports in Sanand, Gujarat by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022.
This is the second major exit of local manufacturing operations in India by a global automotive brand.
General Motors which entered India just a few years before Ford stop selling cars in India in 2017.
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, Ford is force to do a restructuring to create a sustainably profitable business in India.
Jim Farley, Ford Motor Company’s 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 10 years, and demand for new vehicles has been much weaker than forecast.”
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.
Anurag Mehrotra, president, and managing director of Ford India Said :
“Despite these efforts, we have not been able to find a sustainable path forward to long-term profitability that includes in-country vehicle manufacturing. The decision was reinforced by years of accumulated losses, persistent industry overcapacity, and lack of expected growth in India’s car market,”.
About 4,000 employees are expects to be affect 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 balance 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.
The company will also 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-base suppliers for parts for its global products, and suppliers and vendors supporting Ford Business Solutions will continue to support the business as normal.
The Ford has been a loss-making local entity burden further by the COVID-19 disruption, and a dated product portfolio.
Ford has invested over $2 billion in India at Chennai and Sanand manufacturing plants.
The 350-acre Chennai plant has a vehicle-making capacity of 200,000 units and 340,000 engines a year.
The Sanand plant spread over 460 acres, which is the younger of the two, has a vehicle-making capacity of 240,000 units and 270,000 engines a year.
Ford enter in India about the mid-1990s Ford has struggled to make a mark in the Indian automotive space despite more than two decades of existence.
At just 1.57 percent market share, Ford rank ninth on the list of India’s biggest carmakers.
Ford sells five models in India Figo, Aspire, Freestyle, EcoSport, Endeavour in the price range of Rs 7.75 to Rs 33.81 lakh.
Ford try to change fortunes in India with the propose handshake with SUV-specialist Mahindra & Mahindra (M&M) a few years ago.
The plan was to share manufacturing plants with M&M besides joint development of products and technologies.
These two companies discuss it for two years before forming a joint venture agreement in October 2019.
But in January 2021 both companies decided against going ahead with the partnership driven by the disruption cause by the pandemic.
Instead of infusing funds for the joint venture with Ford which was Rs 1,400 crore, M&M routed the investment towards its own electric mobility programme.
How Ford’s Exit from India will Impact Resale of Figo, Aspire, EcoSport Models?
After years of struggle and piling up of losses to the tune of billions of dollars, Ford has become the latest carmaker to exit the Indian automobile market.
The sale of the current models of all the cars will cease till dealers’ stock last.
The big question that arises now is what will happen to the resale of Ford’s popular cars such as Figo and Aspire and EcoSport.
Lakhs of Indians currently own four-wheelers manufacture and sold by Ford.
Ford has said that the company is going to provide full customer support operations.
Customers will also get aftermarket parts and warranty support services from the company.
Giving such assurance is likely to provide confidence to sellers planning to sell their old Ford four-wheelers.
Buyers could also show some interest if the company continues to offer its services.
For more clear picture we may have to wait a little more to understand how Ford’s resale market will be impacted by its exit.
As there hasn’t been any announcement by Ford whether the firm will buy back the existing models or not.
Jim Farley, Ford Motor Company’s president and CEO Said :
“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.”
Ford will continue to operate select outlets in India to maintain its presence in the country.
Ford will sell its exclusive cars such as the Mustang coupe and Mustang Mach-E electric, among many others from the stores.
President and managing director of Ford India said that the carmaker has a long and proud history in India.
He 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,”.
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