Yesterday in a surprising manner, automobile major Ford India announced that they are stopping their India manufacturingfrom two of their domestic plants. This announcement has certainly led their employees and dealers deeply concerned.
Around 4,000 Ford employees in addition to another 40,000 employed with the dealerships are expected to be affected by the company’s restructuring. However, the company will serve the India domestic market with imports.
Besides, the development assumes significance as Ford India is the fifth biggest exit from Indian markets since 2017 after General Motors, Man Trucks, Harley Davidson and UM Lohia.
Ford has two plants in India – one near Chennai and one at Sanand, Gujarat.
It will, however, continue to provide customers in India with parts, service and warranty support. It will also expand its city-based Ford Business Solutions team and bring to the market some of its global vehicles and electrified SUVs.
“As part of the plan, Ford India 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,” a company statement said.
According to Ford India, the 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 have necessitated a restructuring, which is expected to create a sustainably profitable business in India.
Sales of current products such as Figo, Aspire, Freestyle, EcoSport and Endeavour will cease once the existing dealer inventories are sold out.
Ford India will begin importing and selling various models, including the Mustang coupe.
“As part of our Ford+ plan, we are taking difficult but necessary actions to deliver a sustainably profitable business in the longer term and allocate our capital to grow and create value in the right areas,” Jim Farley, President and CEO, Ford Motor Company was quoted as saying in the statement.
“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,” he added.
Ford India said 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,” Ford India President and Managing Director, Anurag Mehrotra, said.
“The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market,” he added.
“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 India said.
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.
Industry Shocked With Ford India’s Announcements
The Federation of Automobile Dealers Associations (FADA) said the auto retail fraternity is “shocked” to learn about Ford India’s announcement.
“While trying to handle dealer anxiety, Ford India President and MD Anurag Mehrotra called me personally and assured that they will adequately compensate the dealers who continue to offer vehicle service to the customers,” said Vinkesh Gulati, President, FADA.
“Though this is a good beginning, it is not enough as there are 170 dealers who in turn have 391 outlets and have invested Rs 2,000 crore for setting up their dealerships. While Ford India employs 4,000 people, the dealerships employ around 40,000 people without displacing them from their home locations,” he added.
As per FADA, at present, Ford India dealers hold 1,000 vehicles which amount to Rs 150 crore via inventory funding from Indian banks.
Additionally, FADA requested the Centre to rollout a ‘Franchisee Protection Act’ as due to its unavailability, auto dealers are not adequately compensated like their counterparts in Mexico, Brazil, Russia, China, Indonesia, Malaysia, Japan, Italy, Australia, Sweden and many other countries, where this law exists.