Ford Motor Co. winding up production in India
NEW DELHI/NEW YORK: Ford Motor Co. will shut its car factories in India and record roughly $2 billion in restructuring charges, scaling back significantly in a country that past management saw becoming one of its three biggest markets.
Manufacturing of vehicles for sale in India will stop immediately, and about 4,000 employees will be affected, the carmaker said in a statement on Thursday. Ford will wind down an assembly plant in Gujarat by the fourth quarter, as well as vehicle and engine manufacturing plants in Chennai by the second quarter of next year. Following the factory closures, Ford will import and sell some vehicles, including Mustang coupes, but the sale of models including the Figo, EcoSport and Endeavour will cease once existing inventory at dealers is sold. Ford’s moves come months after it dropped a plan to cede most of its Indian operations to local sport utility vehicle maker Mahindra & Mahindra Ltd. Ford India racked up more than $2 billion in losses during the past decade and wrote down the value of its business by about $800 million in 2019.
CEO Jim Farley has signalled he will no longer pour capital into marginal markets that provide little or no return. “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,” Farley said. “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 said it will spread the restructuring charge over several years, booking $600 million this year, $1.2 billion in 2022 and the rest in subsequent years. The automaker reiterated it sees global restructuring charges this year of between $2.2 billion and $2.7 bn before interest and taxes.
Difficult market
Foreign automakers have found it difficult to gain a foothold in the value-conscious Indian market dominated by Maruti Suzuki India Ltd’s cheap cars. The government’s high tax regime, which imposes levies as high as 28% on gasoline vehicles, has also been a major roadblock. Toyota Motor Corp. last year said it won’t expand further in India due to high tariffs, while Harley-Davidson has exited the market. General Motors pulled out in 2017.
Ford India had a market share of just 1.42% in August, compared with 1.9% a year ago. The local units of Japan’s Suzuki Motor Corp. and South Korea’s Hyundai Motor Co. together control more than 60% of the market.