Ford Motor is to close its manufacturing plants in India after suffering a $2 billion loss due to low demand and lack of growth.
The decision by Ford Motor Company to close plants in Sanand and Chennai comes after massive losses over 10 years and a lack of growth with low demand. With this decision, at least 40,000 employees will lose their jobs.
Ford entered India in the mid-1990s and the American automobile company on September 9 said it is “forced” to end manufacturing operations in India and close plants at Sanand and Chennai, due to “huge accumulated losses and lack of growth in a difficult market”.
Ford will wind down the manufacturing of vehicles for exports in Sanand, Gujarat by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022, a statement read.
This is the sixth major exit of local manufacturing operations in India by a global automotive brand. US giant General Motors, which entered India just a few years before Ford, stopped selling cars in India in 2017. Fiat, United Motors, Harley Davidson, Premier Automobiles, and now Ford, all moved out.
Ford in particular suffered accumulated operating losses of more than $2 billion over the past 10 years and a $0.8 billion non-operating write-down of assets in 2019, Ford is forced to do a restructuring to create a sustainably profitable business in India, the company further added.
Jim Farley, Ford Motor Company’s president, and CEO, Ford Motor Company said, “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. 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.”
“Despite these efforts, we have not been able to find a sustainable path forward to long-term profitability that includes in-country vehicle manufacturing. The decision was reinforced by years of accumulated losses, persistent industry overcapacity, and lack of expected growth in India’s car market,” Anurag Mehrotra, president, and managing director of Ford India.
While the employees will lose work, Ford assures they will work closely with employees, unions, suppliers, dealers, government, and other stakeholders in Chennai and Sanand to develop a fair and balanced plan to ease the effects of the decision, the company added.
Ford India will maintain parts depots in Delhi, Chennai, Mumbai, Sanand, and Kolkata and will work closely with its dealer network to restructure and help facilitate their transition from sales and service to parts and service support.
The company will also keep a smaller network of suppliers to support engine manufacturing for exports and will work closely with other suppliers to ensure a smooth wind-down of vehicle manufacturing. It also will continue to rely on India-based suppliers for parts for its global products, and suppliers and vendors supporting Ford Business Solutions will continue to support the business as normal.
Ford’s losses have been aggravated further by the COVID-19 disaster which hit all economies as well, but demonetization in India in 2016 was the start of slowing buying capacities and there was less demand for luxury goods and items such as cars, expensive clothes and lifestyles slowed down, while companies started moving out. Industrial growth and investments started fading away.
With the worst jobs losses in 45 years, low buying capacity due to no income, poor implementation of GST, shattered economy with the cost of living even higher than ever, highest fuel rates in the world, and a bankrupt exchequer, companies are moving out.
The government is slammed for its poor economic policies which had led to a financial crisis and here are some of the comments:
Gaurav Pandhi, Congress leader says, “Slogans & PR events don’t help economies to grow. Six auto major have moved out of India due to the failed policies of BJP regime.
New Slogan: Make ‘ANI’ in India
Slogans & PR events don't help economies to grow. Six auto major have moved out of India due to the failed policies of BJP regime.
New Slogan: Make 'ANI' in India
— Gaurav Pandhi (@GauravPandhi) September 10, 2021
M K Venu of The Wire tweeted, “US automaker Ford Motors-$2.5 billion invested in India over 2 decades for a 4 lakh annual capacity, is shutting shop in India due to low demand. Ford operates at just 20% capacity. High taxes and petrol/diesel prices also cause of low demand. Bad optics for PM due to visit US.
US automaker Ford Motors-$2.5 billion invested in India over 2 decades for a 4 lakh annual capacity, is shutting shop in India due to low demand. Ford operates at just 20% capacity. High taxes and petrol/diesel prices also cause of low demand. Bad optics for PM due to visit US.
— M K Venu (@mkvenu1) September 10, 2021
Dr. Shama Mohamed tweeted, “Ford Motor will exit India. Dealers have invested over Rs 2,000 crore & employing around 40,000 people across the country. All that is lost! The auto sector has been stressed since even before the start of the pandemic but it hasn’t received the slightest help from the BJP govt!
Ford Motor will exit India. Dealers have invested over Rs 2,000 crore & employing around 40,000 people across the country. All that is lost! The auto sector has been stressed since even before the start of the pandemic but it hasn't received the slightest help from the BJP govt!
— Dr. Shama Mohamed (@drshamamohd) September 10, 2021
Perhaps the government has to move out of denial mode and admit there is a severe economic crisis in India.