Ford Motor Firm bails on India, will shut automobile factories there | Automotive Trade Information

Ford is shutting its automobile factories in India after Ford India racked up greater than $2bn in losses over the previous decade.

Ford Motor Co. will shut its automobile factories in India and document roughly $2 billion in restructuring fees, scaling again considerably in a rustic that previous administration noticed changing into one in every of its three largest markets.

Manufacturing of autos on the market in India will cease instantly, and about 4,000 workers shall be affected, the carmaker stated in an announcement Thursday. Ford will wind down an meeting plant within the western state of Gujarat by the fourth quarter, in addition to car and engine manufacturing crops within the southern metropolis of Chennai by the second quarter of subsequent yr.

Ford’s strikes come months after it dropped a plan to cede most of its Indian operations to native sport utility car maker Mahindra & Mahindra Ltd. Ford India racked up greater than $2 billion in losses in the course of the previous decade and wrote down the worth of its enterprise by about $800 million in 2019.

Chief Govt Officer Jim Farley has signaled he’ll not pour capital into marginal markets that present little or no return. In January, Ford stated it could stop greater than a century of producing in Brazil and took a $4.1 billion cost. Farley as an alternative is pushing deeper into China, the world’s largest auto market, the place Ford’s Lincoln luxurious line now sells extra fashions than it does within the U.S.

“We’re taking troublesome however obligatory actions to ship a sustainably worthwhile enterprise longer-term and allocate our capital to develop and create worth in the precise areas,” Farley stated in an announcement. “Regardless of investing considerably in India, Ford has collected greater than $2 billion of working losses over the previous 10 years and demand for brand spanking new autos has been a lot weaker than forecast.”

In a submitting, Ford stated it should unfold the restructuring cost over a number of years, reserving $600 million this yr, $1.2 billion in 2022 and the remainder in subsequent years. The automaker reiterated it sees international restructuring fees this yr of between $2.2 billion and $2.7 billion earlier than curiosity and taxes.

Ford shares fell 2% at 9:44 a.m. in New York. The inventory surged 48% this yr by means of Wednesday’s shut.

Troublesome market

International automakers have discovered it troublesome to achieve a foothold within the value-conscious Indian market dominated by Maruti Suzuki India Ltd.’s low-cost automobiles. The federal government’s excessive tax regime, which imposes levies as excessive as 28% on gasoline autos, has additionally been a significant roadblock. Toyota Motor Corp. final yr stated it gained’t broaden additional in India as a consequence of excessive tariffs, whereas Harley-Davidson Inc. has exited the market. Normal Motors Co. pulled out in 2017.

Ford India had a market share of simply 1.42% in August, in contrast with 1.9% a yr in the past, knowledge from Federation of Vehicle Sellers Associations confirmed. The native models of Japan’s Suzuki Motor Corp. and South Korea’s Hyundai Motor Co. collectively management greater than 60% of the market.

The retreat by Ford is an additional blow to Prime Minister Narendra Modi’s Make-in-India program, which inspires firms to fabricate regionally. Tesla Inc. has urged Modi’s administration to permit it to import automobiles extra cheaply earlier than it commits to organising a manufacturing facility within the nation.

Ford was one of many first international automobile firms to enter India when the financial system opened up within the early Nineties. The corporate first arrange store in 1926 however shut down its preliminary operation within the Fifties.

Following the manufacturing facility closures, Ford will import and promote some autos, together with Mustang coupes, however the sale of fashions together with the Figo, EcoSport and Endeavour will stop as soon as present stock at sellers is bought.

Unsure future

The transfer calls into query the way forward for the EcoSport small SUV within the U.S., which the corporate had been importing from India. Ford launched the mannequin within the U.S. in 2018, however it has had little success. Gross sales are down 22% within the U.S. this yr.

Ford thought-about a number of choices in India, together with partnerships, platform sharing and contract manufacturing with different carmakers earlier than deciding to close down factories in India. It’s nonetheless contemplating the potential of promoting its manufacturing crops within the nation.

(Updates with share buying and selling in seventh paragraph.)