4,000 employees to be impacted.
U.S.-headquartered Ford on Thursday announced restructuring of the Indian operation under which the company will stop manufacturing vehicles at its two plants in the country, resulting in loss of jobs for about 4,000 employees.
The company, however, will not be fully exiting the India market, and will focus on its ‘Ford Business Solutions’ as it looks to create a “sustainably profitable” business in the country.
“Ford India will cease manufacturing vehicles for sale in India immediately…[the company] 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,” the company said in a statement.
The company added that 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,” Anurag Mehrotra, president and managing director of Ford India, said, adding that “The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market.”
Mr. Mehrota 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 said it will continue to work closely with employees, unions, dealers and suppliers to care for those directly impacted. It pointed out that India will remain home to Ford’s second-largest salaried workforce globally, and 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.
“Ford plans to significantly expand its 11,000-employee Business Solutions team in India in coming years to support Ford globally. The team will focus on engineering, technology, and business operations centres of excellence,” it said.
It also added that 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, will continue to support Ford’s business in India.
The company said that it plans to serve customers in India with iconic vehicles, including Mustang coupe. “Customers in India also will benefit longer term from the Company’s plan to invest more than U.S. $30 billion globally to deliver all-new hybrid and fully electric vehicles, such as Mustang Mach-E,” it said.
Ford said it will continue to provide customers in India with ongoing parts, service, and warranty support.
The decision follows 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.
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. It 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-based suppliers for parts for its global products, and suppliers and vendors supporting Ford Business Solutions will continue to support the business as normal,” it added.
“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,” it added.