Ford pulls the plug on vehicle production in India; 4,000 employees to be affected
New Delhi, Sep 9: After nearly three decades of struggling to make a mark in India, US auto major Ford Motor Co on Thursday said it will stop vehicle production at its two plants in the country and will sell only imported vehicles going ahead as part of a restructuring exercise.
The company, which invested about USD 2.5 billion at its Chennai (Tamil Nadu) and Sanand (Gujarat) plants, has accumulated operating losses of around USD 2 billion in India in the last ten years. Its decision will impact over 4,000 employees and 150 dealer principals who operate over 300 outlets.
It will, however, continue to manufacture engines from its Sanand plant which will be exported to the company's global operations.
With shutting down of the vehicle manufacturing operations, the automaker will stop selling vehicles such as the EcoSport, Figo, Endeavour, Freestyle and Aspire, which are produced from these plants.
In an announcement, Ford said it will wind down vehicle assembly in Sanand by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022.
"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, Ford Motor Company's president and CEO Jim Farley said in a statement.
Despite investing significantly in India, Ford has accumulated more than USD 2 billion of operating losses over the past ten years and demand for new vehicles has been much weaker than forecast, he noted.
"I want to be clear that Ford will continue taking care of our valued customers in India, working closely with Ford India's dealers, all of whom have supported the company for a long time. 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 stated.
The automaker said that it will focus on growing its Ford Business Solutions capabilities and team in the country, as well as engineering and engine manufacturing for export.
With more than 11,000 team members currently in India, Ford Business Solutions plans to expand to provide more opportunities for software developers, data scientists, R&D engineers, and finance and accounting professionals, in support of the Ford+ plan to transform and modernise Ford globally, it added.
More than 500 employees at the Sanand Engine plant, which produces engines for export for the best-selling Ranger pickup truck, and about 100 employees supporting parts distribution and customer service, also will continue to support Ford's business in India, the company said.
Addressing a virtual press conference, Ford India President and Managing Director Anurag Mehrotra said that for the company to continue investing in vehicle manufacturing in India, it needed to show a path forward to a reasonable return of investment.
"Unfortunately, we are not able to do that and now we are left with no other option, but to restructure the business in India," he noted.
Mehrotra said the company tried several options to bring about a viable business plan, including introduction of new products, emerging market operating model to bring down costs, potential collaborations with OEMs such as Mahindra and even contract manufacturing.
"Unfortunately, no matter what we tried or investigated, because there are tons of these scenarios that we looked at including manufacturing footprint consolidation, but whichever scenario we tried or investigated, all our projections show that we will continue to deliver suboptimal returns on shareholder investment," he added.
The company took restructuring action after all its efforts for viable business operations failed.
The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India's car market, he added.
The Indian car market was expected to touch 7 million units per annum by 2020 and 9 million units by 2025, but that has not happened, Mehrotra stated.
"It is just around 3 million units. Our plants are operating at just 21 per cent of the installed capacity. In order to be viable we focussed on exports but with tightening of norms in the US and Europe, volumes have dropped," he added.
When asked about the severance package it would offer to the employees who would end up losing their jobs, Mehrotra said that "an equitable and fair package would be offered" to the affected employees.
The company would also start talks with prospective buyers for its plants, he added.
Ford plans to import models like Mustang coupe and other electrified models such as the electric SUV Mach-E in the future while sales of current products such as Figo, Aspire, Freestyle, EcoSport and Endeavour will cease once existing dealer inventories are sold.
The company said it 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.
It will continue full customer support operations for these vehicles with service, aftermarket parts and warranty coverage, the company added.
The automaker said it will maintain 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.
However, the company 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 Motor Co said as a result of its decision to restructure the Indian business, it currently expects to record "pre-tax special item charges of about USD 2 billion, including about USD 0.6 billion in 2021, about USD 1.2 billion in 2022 and the balance in subsequent years".
Within that total, the company said it "will be about USD 0.3 billion of non-cash charges, including accelerated depreciation and amortization. The remaining cash charges of about USD 1.7 billion will be paid primarily in 2022 and are attributable to settlements and other payments".
Ford has been struggling for years to make a mark in India's automotive market. Ford India has an installed manufacturing capacity of 6,10,000 engines and 4,40,000 vehicles a year.
It also exported its models such as Figo, Aspire, and EcoSport to over 70 markets around the world.
In January this year, Ford Motor Co and Mahindra & Mahindra had decided to scrap their previously announced automotive joint venture and chose to continue independent operations in India.
Ford is the second American auto major after General Motors to shut down plants in India.
In 2017 General Motors announced that it would stop selling vehicles in India as there was no turnaround in its fortunes here even after struggling for over two decades to make a mark.
The company's Halol plant in Gujarat was taken over by MG Motors, while it continued to run its Talegaon plant in Maharashtra for exports but ceased production there last December.
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CM Siddaramaiah rebuts BJP's '63 per cent' corruption charge
Bengaluru (PTI): Karnataka Chief Minister Siddaramaiah on Thursday refuted BJP leader R Ashoka's accusation regarding a judge's alleged remark about "63 per cent corruption" in the state, saying the opposition is "twisting facts" and attempting to shift blame from its own past tenure.
In a post on X, Siddaramaiah said the Leader of Opposition in the Karnataka Assembly had “tried to hang the BJP’s bell of sins around the Congress government's necks and has ended up embarrassing himself” by misinterpreting the Upa Lokayukta’s comments.
"In the report submitted in November 2019, Honourable Upa Lokayukta B Veerappa had stated that there was 63 per cent corruption in the State. At the time he submitted the report, the BJP government led by Yediyurappa was in power in the State,” he clarified.
Countering Ashoka’s demand for a CBI probe, Siddaramaiah listed a series of scandals under the previous BJP government, saying corruption cases were "not just one or two".
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He accused the former regime of "shameless loot" even during the COVID crisis and said "a minimum 40 per cent commission was the norm across departments".
Referring to the death of contractor Santosh Patil, alleged irregularities in irrigation projects, the PSI recruitment scam and charges levelled by BJP MLC H Vishwanath against current state party president B Y Vijayendra, he said: “If we begin listing the scams from the BJP era, an entire epic volume could be written.”
Targetting the Centre, Siddaramaiah said under Prime Minister Narendra Modi, who proclaims “Na khaaoonga, na khaane doonga” (Neither shall I take kickbacks, nor allow others to take it), India was 'sinking into corruption'.
He cited Transparency International rankings that place the country 96th globally.
Dismissing Ashoka’s claims as “foolishness”, Siddaramaiah asserted that his administration was ensuring transparency in “recruitment to transfers”, preventing misuse of money and power.
“Mr R Ashoka, the monumental corruption you created cannot be cleaned up in just two and a half years,” the Chief Minister said. “Give us some time — we will set everything right.”
Ashoka demanded the transfer of all corruption cases against the Congress government in the state to the CBI, and called for its resignation.
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His demand comes following an alleged remark by Upalokayukta Justice B Veerappa that the level of corruption in Karnataka stood at '63 per cent'.
"We had fought against this corrupt government both inside and outside the assembly when the MUDA scam, Valmiki ST Development Corporation scam surfaced. At that time, CM Siddaramaiah repeatedly asked for evidence of corruption. As per our constitution, courts and judges hold big positions and what they say is regarded as order or a record," Ashoka, also the Leader of Opposition in the state assembly, said.
Speaking to reporters here, he said now a judge has stated that the government in Karnataka is "63 per cent corrupt".
"We-- BJP-- had made a 60 per cent commission charge against this government, but a judge has said it is not 60, it is 63 per cent. He (judge) said it at an event where he shared the stage with other judges and senior advocates. He has alleged that there is corruption in almost all departments, nothing happens without paying commission. Karnataka is in fifth position in corruption," he claimed.
At a public event on Wednesday, Justice Veerappa had claimed that the corruption in Kerala stood at 10 per cent, while it is 63 per cent in Karnataka.
He had said that he was able to witness it after becoming the Upalokayukta.
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Recalling that the Congress government, after coming to power, formed a Special Investigation Team (SIT) to probe the "40 per cent commission" charge it had made against the previous BJP government, Ashoka asked -- what probe will the government order, following the 63 per cent corruption allegation against it.
"If you have any shame left, resign and go... you formed SIT against us, constitute CBI probe on this (allegations against Congress govt), if you have guts, let the corruption in various departments come out in the open," he added.
According to the LoP, Karnataka has become an "ATM" for the Congress party to fund any state elections. Power goes to those who give more money to Sonia Gandhi and Rahul Gandhi.
"For the recent Bihar elections, more than Rs 300 crore has gone from Karnataka itself. A breakfast meeting of Ministers was called to collect this money," he said, adding that Congress is synonymous with corruption, and corruption is Congress' home deity.
