Ford Sees $4.1 Billion Charge on Three Brazil Plant Closures
The automaker on Monday said that it will close two factories in Brazil immediately and a third by the end of the year.
(Bloomberg) -- Ford Motor Co. is ceasing manufacturing operations in Brazil after more than 100 years of building cars in the country as part of a restructuring that will eliminate 5,000 jobs and result in about a $4.1 billion charge.
The automaker said Monday it will close two factories in Brazil immediately and a third by the end of the year, ending sales of three locally made models: the Ecosport, Ka and T4. The job losses are mostly in Brazil but also include workers in Argentina, it said.
The cuts are part of an $11 billion global restructuring started under former Chief Executive Officer Jim Hackett and now continued by his successor, Jim Farley. The company will incur about $2.5 billion in pretax charges against earnings for 2020 and another $1.6 billion this year.
The latest plant closings come after Ford shut a heavy-duty truck factory in Brazil in 2019, taking a $460 million charge. Ford will be left with one major factory in a region where founder Henry Ford established a presence early last century.
“We know these are very difficult, but necessary, actions to create a healthy and sustainable business,” Farley said in a statement.
The move is aimed at helping Ford achieve an 8% pretax profit margin globally. South America has been a persistent money loser for most of the last 16 years. The company reported pretax losses of $386 million there in the first three quarters of last year. Ford will report its fourth quarter earnings on Feb. 4.
“The market simply doesn’t and isn’t going to support our current cost structure in the region,” T.R. Reid, a company spokesman, said in a media briefing today. “What we’re doing will help us create a sustainably profitable business in that part of the world.”
Ford said it will continue to sell vehicles in Brazil and elsewhere in South America, including the Ranger midsized pickup built at a plant in Argentina and Transit commercial vans imported from the U.S.
Ford shares closed up 3.3% to $9.30 in New York, the highest in a month.
Ford’s move to reduce its footprint in South America “makes sense,” after the automaker sustained average annual pretax losses of $800 million in the region since 2014, Dan Levy, a Credit Suisse analyst, wrote in a note to investors.
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