Ford, one of the first global auto giants to set shop in India in the 1990s, on Thursday announced shutting down of its manufacturing facilities in India, blaming accumulation of operational losses for its decision.
Around 4,000 employees of Ford working at its factories in Maraimalainagar, 35 km from Chennai, and Sanand in Gujarat are likely to lose their jobs due to the company’s decision to cease the manufacturing of vehicles.
These employees were informed of the company’s decision on Thursday afternoon, and the company executives are “working 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 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,” the company said in a statement, adding that it would continue to work in India through Ford Business Solutions team.
The entry of Ford, one of the iconic automobile brands of the US, into Chennai, laid the foundation stone for the city emerging as India’s very own Detroit. After Ford came to Chennai in 1995, top carmakers like Hyundai, Renault-Nissan, BMW, and others flocked to the city making it an automobile hub of the country.
The company attributed the decision to close down the plants for vehicle manufacturing to the accumulated operating losses of more than $2 billion over the past 10 years, a $0.8 billion non-operating write-down of assets in 2019, persistent industry overcapacity and lack of expected growth in India’s car market.
While Ford will not manufacture its vehicle in the country anymore, the company, however, will continue to sell its high-end cars by importing them. In the same breath, Ford said it will continue to provide customers in India with service, and warranty support, while new cars will be sold by dealers till their inventories are over.
K E Raghunathan, Convenor of Consortium of Indian Associations (CIA), told DH that Ford India closing down its operations in India is a blow to the Small and Medium-scale Enterprises (SMEs).
“It is not about just Ford closing its operations. It is about the survival of 4,000 small and medium units that are dependent on Ford India. These units fuelled Ford’s production in India. Tamil Nadu will be pinched hard in the coming years if automobile majors continue to bleed,” Raghunathan said.
“This was expected. This marks the beginning of the fall of the empire in the automobile sector. We have been fearing the worst and the worst has happened. We refused to acknowledge the problem in the bud and instead of solving it we allowed it to rise through with or without policy intervention. We never acknowledged any of the needs of the automobile giants. What did we do to save the patient?” he asked.
Contending that the restructuring is expected to create a sustainably profitable business in India, Ford said it will focus on growing its Ford Business Solutions capabilities and team in the country, as well as engineering and engine manufacturing for export.
“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,” said Jim Farley, Ford Motor Company’s president and CEO.
“I want to be clear that Ford will continue taking care of our valued customers in India, working closely with Ford India’s dealers, all of whom have supported the company for a long time. India remains strategically important for us and, thanks to our growing Ford Business Solutions team, will continue to be a large and important employee base for Ford globally,” 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,” Anurag Mehrotra, President, Ford India, said.
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