Having invested over $2.5 billion in India, and with a presence since 1995, Ford ended 2020-21 selling 48,042 units to garner a 1.8% share of the pie.
The company promised that “restructuring” of its India business — that will see its two plants in Chennai and Sanand shut down by the second quarter of next year — will not mean end of services and after-sales support for the roughly 10-lakh customers it has in the country as its 300-odd dealerships will remain open for service.
“This is a very difficult decision. No matter what we tried and investigated, all our projections show we will continue to give sub-optimal returns to shareholders and investors. There was no other option, but to restructure,” Anurag Mehrotra, MD and president of Ford India, said as he outlined a new strategy that would see the company begin import and sale of “must-have, iconic vehicles”, including Mustang coupe.
Ford said it took the decision after considering several options, including partnerships, platform sharing, contract manufacturing with other makers, 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 move will see many of the 4,000-odd permanent employees of Ford India move out. “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,” the company said.
Dealers fear that apart from jobs at Ford, over 40,000 employees at the company’s retail points also face a threat around their employment. Vinkesh Gulati, president of dealers’ association FADA, said Ford dealers have invested around Rs 2,000 crore towards retail and service infrastructure. “The retail fraternity is really shocked to hear Ford’s announcement where it has said that it will shut down production,” FADA said.
While the writing was on the wall for several months, Thursday’s announcement brought finality to it.
Ford failed to grow in a market where others such as Maruti, Hyundai, Tata Motors and Mahindra, reaped in dividends. Newcomers such as Korean Kia and China’s MG Motors also managed to get a solid opening, despite starting late in 2019.
Ford’s losses to date stand at $2 billion (it also effected a $0.8 billion non-operating write down of assets in 2019), and the company says it preferred to invest money in markets where it can fetch returns than sink further cash in India. However, the exit carries further cash outgo for the company, which is estimated at over $1.7 billion, including various settlements, apart from $0.3 billion in non-cash charges.
The company will, however, continue the ‘Ford Business Solutions’ programme in India, where it employs 11,000 members engaged in software development, data science, R&D, and finance and accounting. 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.
The closure comes months after Ford’s last-ditch efforts to forge a JV with M&M failed. The partnership, which had been in the works since 2019, was called off on the last day of 2020, as Mahindra decided to go back to “core fiscal discipline”.
(With inputs from Nandini Sengupta in Chennai)
For all the latest business News Click Here
