Ford Motor Co. announced early Thursday that it will dramatically change its strategy in India, shutting down manufacturing operations that have been bleeding the automaker while at the same time investing in software developers, data scientists, research and development engineers and finance professionals.
The company will stop making vehicles for sale in India — which include the Figo, Aspire, Freestyle, EcoSport and Endeavour — right away. Once supplies of those vehicles are sold, there will be no more, said Ford spokesperson Sinead Phipps. Manufacturing of some of those vehicles will continue for export until the end of 2021 from the Sanand plant and into the middle of 2022 from the Chennai vehicle and engine plants.
“We will definitely continue to provide parts, warranty and service support for customers in India however,” Phipps said.
Meanwhile, Ford will maintain a presence in India, home of the company’s second largest salaried workforce after North America.
Ford currently has more than 11,000 employees in India whose work supports the global business, and the plan now is to “significantly expand” the Business Solutions unit in India in coming years that will focus on engineering and technology, Ford said in its news release. It did not provide specifics on job growth.
“We haven’t put a number on it,” Phipps said. But Ford is “recruiting right now for a variety of roles and will continue to do so.”
This reorganization will eliminate 4,000 manufacturing jobs, Phipps told the Free Press.
Currently, Ford employs an estimated 3,000 people in software engineering and information technology, 400 people in research and analytics, 2,500 in engineering and 1,000 in finance in India, Phipps told the Free Press.
“While most are working from home right now, they usually operate out of a new, $240 million campus (in Chennai), which was opened two years ago, that includes technology labs, a talent center and modern workspaces,” Phipps said.
In the future, Ford is planning to sell some select vehicles in India, including the Mustang coupe and Mach-E, but in lower volumes than what’s sold in India today.
This latest action is expected to make Ford operations in India profitable.
While focused on the Ford Business Solutions unit, Ford India will continue making engines for export and also provide customer support operations with service, aftermarket parts and warranties, Ford said in a news release.
Ford India is the entity that is responsible for sales and manufacturing, while Ford Business Solutions is another Ford entity based in India.
Most of the 4,000 or so people losing their jobs are union factory workers.
More than 500 employees at the Sanand Engine plant, which makes engines for export for the Ford Ranger pickup, and about 100 employees who work in parts distribution and customer service will continue to work for Ford India, Ford 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,” Ford CEO Jim Farley said in a statement. “Despite investing significantly in India, Ford has accumulated more than $2 billion in operating losses over the past 10 years and demand for new vehicles has been weaker than forecast.”
He emphasized that India “remains strategically important” to Ford.
Anurag Mehrotra, president of Ford India, said in a statement, “We are committed to taking care of our customers and working closely with employees, unions, dealers and suppliers to care for those affected by the restructuring.”
Ford said it made this decision after exhausting all options and failing to find a manufacturing partner. Ford is still considering the sale of its manufacturing plants in India, the release said.
Automakers building cars in India include Maruti Suzuki India, Hyundai Motor India, Mahindra & Mahindra, Tata Motors and Honda Cars India, Nissan, Toyota, Renault and Volkswagen, according to the most recent Indian business data lists.
Ford India will maintain its parts depots in Delhi, Chennai, Mumbai, Sanand, Kolkata and work with its dealers to restructure the transition from sales to service and parts support, Ford said. A small network of dealers will continue operating to support engine manufacturing for exports and oversee a seamless manufacturing exit.
“We are grateful to our dedicated team in India who have undertaken many actions in recent years in an attempt to position the company for profitability and growth,” Steven Armstrong, transformation officer for India and South America, said in a statement. “Our ability to refocus our presence in India is a result of their building our expertise in low-cost engineering, global engine manufacturing quality and business services.”
This announcement comes just hours before Ford plans to make a presentation to RBC (Royal Bank of Canada) Capital Markets day, which is closely monitored by Wall Street.
Dramatic turn of events
This was not how things were expected to turn out in India.
A cost-cutting deal called “pivotal” by Ford in 2019 went kaput and seemed to throw all hopes for the future in India into question in December 2020.
The Dearborn automaker and powerhouse vehicle maker Mahindra & Mahindra “mutually and amicably determined they will not complete a previously announced automotive joint venture between their respective companies,” Ford announced in 2020.
The Dec. 31 announcement marked an end to a deal initially touted in October 2019 as key to the $11 billion restructuring plan put forth by then-CEO Jim Hackett.
Ford said at the time that it had inked a deal with Mahindra that would shift Ford’s long-struggling India operation to a new joint venture valued at $275 million and “develop, market and distribute Ford brand vehicles in India and Ford brand and Mahindra brand vehicles in high-growth emerging markets around the world.”
India hit hard
Bakar Sadik Agwan, a senior automotive consulting analyst at GlobalData, a leading data and analytics company, called the Ford action a “final blow to the Indian automotive industry” and “the final curtain” for Ford in India after 30 years there.
“The Blue Oval did some major business restructurings so far this year including ‘end of production’ in Brazil as it aims to focus on profitable markets and the must-have electric vehicles,” Agwan wrote Thursday, citing “Ford’s fallout with Indian automaker Mahindra” as a key reason for the latest development.
Still, Ford did learn an important lesson about exiting India from a competitor.
“Ford now joins the league of American auto giant General Motors, which had a similar fate in India. However, a lesson learnt from GM, Ford announced a complete production shut with deadlines at both its location facilities – unlike GM which kept the production running several years for exports which eventually came to an end in 2020,” Agwan said.
Ford has been losing ground to newer automakers in India, he said.
“… Price promotions, face-lift upgrades, launching automatic variants failed to lure Indian customers,” Agwan said. “Ford was the pioneer in the subcompact SUV segment and disrupted the Indian market with its EcoSport. However, despite being technically competent and ‘deserving,’ the company’s vehicles lost their charm in India.”