Ford Motor is scaling down operations in India and will cease local production there, moves designed to please its shareholders.
Ford, which is battling JLR-parent Tata Motors and other Asian rivals in the sub-continent, wants to sell a few high-end imported cars in the cost-conscious market.
Sales of existing models, such as the Figo sedan, and the Endeavour and Ecosport sport utility vehicles (SUVs), will continue while stockpiles last.
Not leaving India
Ford is "not leaving" India, and will continue to support its dealers and their customers in the country, Ford India president and managing director Anurag Mehrotra said on Thursday on the company’s official Twitter handle.
"Unfortunately, not matter what we tried or investigated, all our projections show that we will continue to deliver sub-optimal returns on shareholder investment. The business change we announced today is designed to create a new asset light business model which is sustainably profitable, longer-term," Mehrotra informed shareholders.
Ford will shutter its engine and vehicle manufacturing operations at its facilities in Chennai and its vehicle manufacturing operation at its facility in Sanand, the company said in a US regulatory filing.
The process to wind down manufacturing in India could take about a year to complete. Reuters reported.
Ford's sales account for less than 2% of the country’s passenger vehicle pie, with the carmaker failing to make the most of a market it first entered 25 years ago. Losses in the Indian auto business hover at $2bn, as against a total investment of $2.5bn over the years, Mehrotra mentioned.
Some months ago, the US-headquartered automaker had reached out to about half-a-dozen automobile firms including Skoda Auto Volkswagen India, and the Tatas, to explore survival options, The Economic Times reported.
That was after Ford’s previously announced partnership with competitor Mahindra & Mahindra (M&M) failed to materialize.
Termination of discussions between the two “followed passing of the 31 December ‘longstop’, or expiration, date of a definitive agreement the organizations entered into in October 2019,” M&M informed the bourses in a 1 January regulatory filing.
The statement added: “the outcome was driven by fundamental changes in global economic and business conditions – caused, in part, by the global pandemic – since the agreement was first announced. Those changes influenced separate decisions by Ford and Mahindra to reassess their respective capital allocation priorities.”
Ford expects to record pre-tax special item charges of about $2.0bn, including about $0.6bn in 2021, about $1.2bn in 2022, and the balance in subsequent years.
For 2021, the Company continues to expect global redesign EBIT charges to be in the range of $2.2bn to $2.7bn, and related cash effects to be in the range of $3.0bn to $3.5bn.