Ford explains move to shut production in India, adds will support customers
Ford Motor has officially announced that it will shut its production facilities in India. Ford India issued a statement today saying it will not manufacture cars in the country any more. It has decided to shut production at its facilities in Sanand (Gujarat) by the fourth quarter of 2021 and Maraimalai near Chennai in Tamil Nadu by the second quarter of 2022.
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Ford's decision to stop vehicle production in India comes 23 years after the carmaker started producing its own cars for this market. Ford has been facing massive operating losses, more than $2 billion over the past 10 years, and a $0.8 billion non-operating write-down of assets in 2019.
Ford Motor had entered India back in 1995 in partnership with Mahindra, called Mahindra Ford India Limited (MFIL). Three years later, Ford separated from Mahindra to set up Ford India Private Limited. Ford's first independent product for Indian market was the Ikon sedan.
Ford's decision may not come as a surprise. Talks of the US-based carmaker shutting India operations has been going on for a while. There were also words that it was looking to share manufacturing facilities with other OEMs to save cost.
Anurag Mehrotra, President and Managing Director of Ford India, said the company considered 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."
“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.
(Also read: Five auto companies that bid farewell to India)
Meanwhile, Ford will also continue to provide customers in India with ongoing parts, service, and warranty support. Sales of current products such as Figo, Aspire, Freestyle, EcoSport and Endeavour will cease once existing dealer inventories are sold. “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," said Anurag Mehrotra.
Ford India will also 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 has also clarified that it will not leave India soon. The company aims to restructure its operations with plans to significantly expand its Chennai-based Ford Business Solutions team and bring in some of Ford’s iconic global vehicles and electric vehicles, such as Mustang Mach-E, through the CBU route. It will also begin importing iconic vehicles, including Mustang coupe.
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 currently has more than 11,000 employees in India, 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.
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.