Ford Motor Ceases Manufacturing In India

In a setback to Prime Minister Narendra Modi’s effort to retain or lure foreign manufacturers in the country, Ford Motor Co. will shut down its plants in India as it cedes operations in a market where it has struggled for more than two decades.

The automaker will shut its two manufacturing units In India, one in Sanand at Gujarat, and another in Chennai, according to its statement.

“Manufacturing of vehicles for export will wind down at Sanand vehicle assembly plant by Q4 2021, and Chennai engine and vehicle assembly plants by Q2 2022,” it said. The company, however, will continue to provide customers in India with ongoing parts, service, and warranty support.

Sales of its products such as Figo, Aspire, Freestyle, EcoSport and Endeavour will cease once existing dealer inventories are sold, the company said. And about 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,” it said.

The decision comes months after Ford said it would go solo in India after its joint venture with Mahindra & Mahindra Ltd. was called off. The companies at that time had agreed to terminate the venture after reassessing in part due to the global coronavirus pandemic.

Following accumulated operating losses of more than $2 billion (Rs 14,700 crore) over the past 10 years and a $0.8 billion (Rs 5,880 crore ) non-operating write-down of assets in 2019, Ford said the restructuring is expected to create a sustainably profitable business in India. The company said it would instead want its India business to grow business solution capabilities as well as engineering and engine manufacturing for export.

“As part of our Ford+ plan, we are taking difficult but necessary actions to deliver a sustainably profitable business longer-term and allocate our capital to grow and create value in the right areas,” Jim Farley, president and CEO at Ford Motor, said. “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.”

Gaurav Vangaal, associate director at IHS Markit, told BloombergQuint that it’s a big blow to the Indian manufacturing system. Ford, he said, was the only carmaker that's exporting India-made cars to the U.S. “The Indian government is expected to roll out production-linked incentives for the auto sector to attract new entrants, at least should give some attention to current OEMs (original equipment makers).”