Ford to cease manufacturing operations in India

Ford Motor Co. will cease manufacturing operations in India — a market where it has accumulated $2 billion in losses in the last 10 years — in a move that will affect some 4,000 employees and carry $2 billion in restructuring charges.

The Dearborn automaker is not pulling out of India entirely. It plans to "significantly" expand a team of salaried employees based in Chennai, and will continue to sell vehicles in one of the world's largest car markets.

The move is part of a broader turnaround plan for the company under CEO Jim Farley, who has scrutinized spending in under-performing parts of the business. In January, Ford said it would stop producing cars in Brazil, another market where it long had struggled. Automakers worldwide face tough decisions on allocating capital amid a costly transition to electric vehicles, an effort to which Ford has dedicated $30 billion in investments through 2025.

"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," Farley said in a statement announcing the move Thursday. 

Ford plans to wind down vehicle assembly at its Sanand Vehicle and Engine Assembly Plant by the fourth quarter. Vehicle and engine manufacturing at its Chennai plant are slated to end by the second quarter of 2022.

More than 500 employees at the Sanand plant, which builds engines for the Ranger pickup truck, and about 100 employees who support parts distribution and customer service, will remain. The company will continue some manufacturing of engines for export, and will maintain parts, service and warranty services for customers in India.

It also plans to expand its Ford Business Solutions team, which currently has more than 11,000 employees based in Chennai, India. Employees who are part of that team "support all aspects of Ford's global business and regions," Ford spokesperson Sinead Phipps said.

Jobs there include software developers, data scientists, research and development engineers, and finance and accounting. The largest teams at Ford Business Solutions are in software engineering and information technology, according to Phipps. 

"India remains strategically important for us and, thanks to our growing Ford Business Solutions team, will continue to be a large and important employee base for Ford globally," Farley said.

Meanwhile, the automaker will begin to import vehicles, including the Mustang coupe and as-yet unannounced electrified offerings, to customers in India, though sales of current products including the Figo, Aspire, Freestyle, EcoSport and Endeavour will stop once existing inventories are sold.  

Asked about what the move means for the EcoSport, which is exported to other markets including North America, Phipps said that production of the subcompact SUV will stop immediately for models sold in India but will continue into 2022 for exports. Beyond that it's unclear.

Ford India had looked into other options to turn around its business, according to the company, including partnerships, platform sharing and contract manufacturing. It still is weighing selling its manufacturing plants in the country.

“Despite these efforts, we have not been able to find a sustainable path forward to long-term profitability that includes in-country vehicle manufacturing,” Anurag Mehrotra, president and managing director of Ford India, said in a statement. “The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India’s car market.”

At the end of last year, the automaker abandoned plans to form a joint venture with Indian conglomerate and SUV manufacturer Mahindra & Mahindra, casting uncertainty on Ford's future in the market. The tie-up would have seen Ford transfer its operations to the partnership and the two companies co-developing several vehicles for India and other global markets.

Over the last several months, Ford executives have signaled that a serious reappraisal of the company's India operations was underway. In February, while reporting 2020 financial results, executives noted that Ford's international markets group — which includes about 100 countries around the world — was profitable when excluding India.

"While we continue our independent operations in India, we are actively evaluating alternatives and reassessing capital allocation for India," Chief Financial Officer John Lawler said at the time.

India, though a large and growing auto market, has proven challenging for many of the world's top automakers. Just a handful of automakers, led by Maruti Suzuki India Limited and Hyundai Motor India, dominate in India, with other manufacturers capturing just slivers of the market share. Some of Ford's competitors, including crosstown rival General Motors Co., already have exited the region.

Ford shuttering its assembly operations in India "reinforces the fact that just because you have a strong history in automotive manufacturing and a deep footprint across the world, and you can make great cars, it's not going to guarantee your journey in a market as complex as India," said Pavan Lall, a Mumbai-based business journalist. 

With offerings such as the Figo hatchback and EcoSport SUV, Lall said, Ford India "has shown more than once ... that they were more than capable of building good cars at great prices that consumers appreciated and bought." But, he said, the automaker faltered on introducing new products across different price points that could compete with the growing lineups of other manufacturers.

"I think where they potentially could have done better is to have continued the pace of those sorts of products and moved smartly up the value chain when they saw that there were shifts happening in consumer culture in India," he said. "That is something their competitors Hyundai and Kia have done really well.”

Ford India will maintain parts depots in Delhi, Chennai, Mumbai, Sanand and Kolkata and said it would "work closely" with its dealer network "to restructure and help facilitate their transition from sales and service to parts and service support."

The automaker expects to record pre-tax special items charges of $2 billion, including about $600 million in 2021, about $1.2 billion in 2022, and the balance in subsequent years, in connection with the restructuring.

jgrzelewski@detroitnews.com

Twitter: @JGrzelewski