The impact of Ford’s exit will also be felt by hundreds of dealers, ancillary industries and MSMEs that have supported the plant up until now.
Padmanabhan* never expected to lose his job in the middle of a pandemic. At 46, he’s worked half his life in a major multinational automobile firm which is one among the USA’s Big Three — the Ford Motor Company. Ford first employed him as a permanent production line operator in its Chennai plant in 1998. Padmanabhan* grew within the company over the decades, drew Rs 50,000 a month and also got elected as the labour union treasurer.
But all of a sudden, he and nearly 2,700 other workers were informed that they will be losing their jobs next year. Ford is winding down its India operations in Q2 2022 and its assembly units in Chennai and Sanand (Gujarat) will be closed down. For those like Padmanabhan, who have been associated with Ford’s Chennai plant since the 90s, the announcement has come as a shock.
“We never had a clue about the plant shutting down. It was one-way communication. On Thursday (September 9) afternoon, we were called in for a meeting where Ford India MD Anurag Mehrotra informed us that the plant is closing down. This really was shocking and it is a matter of our livelihoods,” Padmanabhan tells TNM. Ford’s Chennai labour union said that roughly 2,700 employees and a few hundred contract staff in Chennai (apart from Sanand) will be affected by the company’s decision. Ford put the total impacted workers at approximately 4,000.
A few months ago, automakers with factories in Chennai such as Renault-Nissan and Hyundai had to close down manufacturing for a few weeks in the wake of protests from workers who complained that they were made to work in unsafe conditions.
Padmanabhan says that Ford had been a good employer during those times. “We were paid our salaries, we got our leaves when we asked them and they (management) made sure we never worked in unsafe conditions. Ford’s work culture has always been great,” he says. But now, he and his fellow operators fear that their company is going to leave them high and dry, with no livelihood options in hand.
Suresh, the president of the Chennai Ford Employees Union, earlier told TNM that the union will now have a general body meeting to discuss the terms of the settlement, after which talks will be held with the management. Workers are concerned about employment and getting them a fair bargain will be the union’s task, he said.
“The mean age in our plant (labourers) is 35. Most of the men who work here have children in high school (11th, 12th), younger children in primary and homemaker wives. They have dedicated their careers to Ford and this plant and now feel abandoned,” 43-year-old Murugan* who has worked in the factory for 21 years.
Murugan says that it is near impossible to find jobs in other automobile assembly units due to the pandemic shrinking the auto market and high demand for jobs. Moreover, most other companies only hire contract employees. “Most automakers such as Hyundai and Nissan do not employ permanent staff. They hire contract labour to work in their assembly units and contract labourers don’t earn enough and can be terminated anytime,” Murugan explains.
Ford said it took the decision after looking at options including partnerships, platform sharing and contract manufacturing with other OEMs. It is still looking at the possibility of selling its manufacturing plants, it added.
However, the impact of Ford’s exit will not be limited to employees and contracted workers at the factory alone, but also dealers, ancillary industries and MSMEs that have supported the plant up until now.
Federation of Automobile Dealers Associations (FADA) chief Vinkesh Gulati said that while Ford has assured to adequately compensate dealers and continue to service customers, it is not enough.
“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 Cr for setting up their dealerships. While Ford India employs 4,000 people, Dealerships employ around 40,000 people without displacing them from their home locations thus being continuously skilled and up-skilled all this while,” he said.
“Ford India Dealers currently hold ~1,000 vehicles which amount to ~Rs 150 Cr via inventory funding from reputed Indian Banks. They also carry Demo Vehicles which are 100’s in numbers. Moreover, Ford India also appointed multiple dealers until 5 months back,” he added, stating that for these dealers, this will be the “biggest financial loss in their entire life”.
The Convenor of Consortium of Indian Associations (CIA) KE Raghunathan tells TNM that Ford’s exit is a symptom of a larger malaise, and things may only get worse from now in the automobile industry, further impacting MSMEs and ancillary industries.
“Normally in an auto sector, the ratio between direct and indirect employment is roughly 1:3, and another 2 gig employees. This is what is going to be the biggest fallout – where roughly 4,000 employees of Ford will lose jobs, then the employment opportunity lost is going to be very high,” Raghunathan says.
He pegged the number of indirect employees being impacted by Ford’s at 12,000-13,000.
“So many ancillaries have been created only for supply to Ford. For MSMEs, some may not be dependent exclusively on Ford but on the automobile sector as a whole, but one wing of theirs is cut off. They have already been impacted by COVID-19 and if they have been catering to three automobile giants, and even one leaving will significantly impact them,” he added.
“We need to wake up, we can’t write this off simply blaming Ford,” he says.
Ford is hardly the first foreign automaker to leave the Indian market. General Motors and Fiat also exited the country.
Ford, in a statement, said its decision to exit the country will cost it $2 billion. The company also said it also suffered $2 billion in operating losses in the last decade. Despite entering the Indian market 25 years ago by setting up its Chennai factory, Ford only has a little less than 2% of the Indian passenger vehicle market. It said that after existing dealer inventories are sold, it will cease the sale of current products such as Figo, Aspire, Freestyle, EcoSport and Endeavour.
With the ongoing slowdown in the automobile industry along with the impact of factors such as the global shortage of semiconductors, commodity prices, BS-VI regulations and more, concerns about the future impact on the Detroit of India remain.
*Names changed to protect identities