Ford Motor Co has announced plans to cease production operations in Brazil in 2021. The US brand has maintained a presence in the South American country since 1919, when it began assembling the Model T for the local market, but a radical global restructuring process will result in operations being wound down, with the loss of around 5000 jobs and pre-tax charges to the company of around £3 billion.
The American carmaker says the Covid-19 pandemic has amplified “persistent industry idle capacity and slow sales that have resulted in years of significant losses.” This announcement comes just 11 days after Ford called off a planned joint venture with India’s Mahindra & Mahindra.
The company will cater to customers in the South America region with a portfolio of connected and increasingly electrified SUVs, pickups and commercial vehicles sourced from Argentina, Uruguay and other markets.
As a result of the latest decision, production will cease immediately at Camaçari and Taubaté in Brazil, with some parts production continuing for a few months to support inventories for aftermarket sales. The Troller plant in Horizonte, Brazil, will continue to operate until the fourth quarter of 2021. As a result, the company will end sales of EcoSport, Ka and T4 once inventories are sold. Manufacturing operations in Argentina and Uruguay and the sales companies in other South America markets are not affected.
Ford says it “will continue to facilitate possible reasonable alternatives for interested parties to take over available production facilities.”
Revaluating businesses worldwide
Ford is actively evaluating its businesses around the world, including in South America, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8% company adjusted EBIT margin and generate consistently strong adjusted free cash flow.
Ford will serve the region from its global product portfolio, including some of its most popular vehicle lines such as the all-new Ranger pickup built in Argentina, new Transit van, Bronco and Mustang Mach 1, and plans to accelerate the introduction of several new connected and electrified models. Ford says it will maintain full customer support operations with sales, service, aftermarket parts and warranty support in Brazil and South America. Ford will also maintain its product development center in Bahia, its proving ground in Tatuí, Sao Paulo, and its regional headquarters in São Paulo.
“With more than a century in South America and Brazil, we know these are very difficult, but necessary, actions to create a healthy and sustainable business,” said Jim Farley, Ford president and CEO. “We are moving to a lean, asset-light business model by ceasing production in Brazil and serving customers with some of the best and most exciting vehicles in our global portfolio. We will also accelerate bringing our customers the benefits of connectivity, electrification and autonomous technologies to efficiently address the need for cleaner and safer vehicles well into the future.”
Ford said it would immediately begin working closely with its unions and other stakeholders to develop an equitable and balanced plan to mitigate the impacts of ending production.
“Our dedicated South America team made significant progress in turning around our operations, including phasing-out unprofitable products and exiting the heavy truck business,” said Lyle Watters, president Ford South America and the International Markets Group. “In addition to reducing costs across the business, we launched the Ranger Storm, Territory and Escape, and introduced innovative services for our customers. While these efforts improved results over the past four quarters, the sustained unfavorable economic environment and the additional burden of the pandemic made it clear that much more was necessary to create a sustainable and profitable future."