American automotive major Ford Motor Company on Thursday announced it has decided stop manufacturing at its two Indian plants, owed by its subsidiary Ford India Private Ltd, due to losses.
In a statement, Ford India said it would expand its city-based Ford Business Solutions team and bring to market some of its global vehicles and electrified SUVs.
Ford India has two plants in India - one near Chennai and one at Sanand, Gujarat.
It will, however, continue to provide customers in India with ongoing parts, service, and warranty support.
"As part of the plan, Ford India 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," the statement said.
According to Ford India, the 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 as necessitated a restructuring which is expected to create a sustainably profitable business in India.
Sales of current products such as Figo, Aspire, Freestyle, EcoSport, and Endeavour will cease once existing dealer inventories are sold.
Ford India will begin importing and selling various models including the Mustang coupe.
"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 was quoted as saying in the statement.
"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," he added.
Ford India said it took these restructuring actions after investigating several options, including partnerships, platform sharing, contract manufacturing with other OEMs, and the possibility of selling its manufacturing plants, which is still under consideration.
"Despite these efforts, we have not been able to find a sustainable path forward to long-term profitability that includes in-country vehicle manufacturing," Ford India President and Managing Director Anurag Mehrotra said.
"The decision was reinforced by years of accumulated losses, persistent industry overcapacity and lack of expected growth in India's car market," he added.
"Approximately 4,000 employees are expected to be affected by the restructuring. Ford will work closely with employees, unions, suppliers, dealers, government, and other stakeholders in Chennai and Sanand to develop a fair and balanced plan to mitigate the effects of the decision," Ford India said.
Ford India 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.
The decision will result in an uncertain future for about 4,800 employees - workers and staff, said a union official.
"The company has decided to close down its two Indian plants. The management has not spoken to us about our future. Maybe on Monday, the officials will hold talks with us," a union official, speaking on condition of anonymity, told IANS.
According to him, Ford India's Chennai plant has about 2,700 associates (permanent workers) and about 600 staff while in Sanand, the number of workers will be about 1,500.