Ford Motor Company has decided to close factories in Sanand and Chennai due to accumulated losses and lack of growth over the past ten years. The relocation will affect at least 4,000 employees.
Due to “large cumulative losses and lack of growth in a challenging market,” Ford Motor Company declared on September 9 that it is “forced” to stop manufacturing operations in India and close plants in Sanand and Chennai.
According to a statement, Ford will stop producing vehicles for export in Sanand, Gujarat in the fourth quarter of 2021, and vehicle and engine production in Chennai in the second quarter of 2022.
This is the second major global automaker to leave India’s indigenous production plants. GM, which entered India just a few years before Ford, discontinued selling automobiles in the country in 2017.
Ford is compelled to restructure to develop a sustainably viable business in India, the company added, after accumulating operating losses of more than $2 billion over the last ten years and a $0.8 billion non-operating write-down of assets in 2019.
“As part of our Ford+ plan, we are taking difficult but necessary decisions to provide a sustainably profitable business longer-term and allocate our capital to expand and create value in the right places,” stated Jim Farley, president and CEO of Ford Motor Company. Despite large investments in India, Ford has lost more than $2 billion in operating losses over the last ten years, and new vehicle demand has been far lower than expected.”
Ford India said it decided to restructure after looking into numerous options, including partnerships, platform sharing, contract manufacture with other OEMs, and the prospect of selling its manufacturing units, which is still being considered.
“Despite our efforts, we have not been able to establish a long-term profitable way forward that includes vehicle manufacture in the country.
Years of losses, ongoing industry overcapacity, and a lack of planned development in India’s automotive market all contributed to the decision “Ford India’s president and managing director, Anurag Mehrotra.
The restructure is projected to affect approximately 4,000 people. Ford said it would work closely with employees, unions, suppliers, dealers, the government, and other stakeholders in Chennai and Sanand to build a fair and balanced plan to offset the decision’s effects.
Ford India will keep parts depots in Delhi, Chennai, Mumbai, Sanand, and Kolkata and will work closely with its dealer network to restructure and make the shift from sales to parts and service support as smooth as possible.
The company will also maintain a smaller network of suppliers to support engine manufacturing for exports.
It will collaborate closely with other suppliers to guarantee a smooth transition away from car production. It will also continue to rely on India-based suppliers for parts for its global products.
Ford Business Solutions’ suppliers and vendors will continue to assist the company as usual.
Ford has been a loss-making local entity, exacerbated by the COVID-19 interruption and an out-of-date product range. According to figures provided by the Society of Indian Automobile Manufacturers, Ford was only producing roughly 20% of its total capacity of 450,000 units at both factories as of July (SIAM).
Ford has invested over $2 billion in manufacturing units in Chennai and Sanand, India. The 350-acre Chennai plant has a 200,000-unit and 340,000-engine-per-year production capacity.
The Sanand facility, which is the newer of the two, is spread out over 460 acres and has a vehicle production capacity of 240,000 units and 270,000 engines per year.
Despite having been in India since the mid-1990s, Ford has struggled to build a name for itself in the Indian automotive market. Ford was rated ninth on the list of India’s largest carmakers, with a market share of barely 1.57 per cent.
In India, Ford sells five models: Figo, Aspire, Freestyle, EcoSport, and Endeavour, with prices ranging from Rs 7.75 lakh to Rs 33.81 lakh.
Ford attempted to improve its fortunes in India a few years ago with a proposed handshake with SUV specialist Mahindra & Mahindra (M&M). The goal was to share manufacturing sites with M&M as well as collaborate on product and technology development.
The two corporations talked about it for two years before launching a joint venture in October of this year. Both of Ford’s India plants were to be housed in this JV (excluding the engine-making plant).
However, due to the interruption caused by the pandemic, both companies decided not to proceed with the relationship in January 2021. Instead of investing in the Rs 1,400 crore joint venture with Ford, M&M decided to put the money into its own electric mobility programme.