Why Ford Is Shutting Down Vehicle Production In India

Ford Motor Company F announced Thursday plans to wind down vehicle manufacturing in India amid mounting operating losses and weaker-than-expected demand in the region.

What Happened: Ford said it will cease vehicle manufacturing in India as part of restructuring of its Indian operations. The company plans to wind down its vehicle assembly in Sanand by the fourth quarter and vehicle engine manufacturing in Chennai by the second quarter of 2022.

The company said it expects to provide its Indian customers with ongoing parts, service and warranty support.

The 500 employees at the Sanand plant producing engines for export for the Ranger pickup truck and 100 employees supporting parts distribution and customer service will continue to support Ford's Indian operation.

"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," said Jim Farley, president and CEO of Ford.

Approximately 4,000 employees are expected to be affected by the restructuring, the company said.

Ford said it currently expects to record pre-tax special item charges of about $2 billion, including about $600 million in 2021, about $1.2 billion in 2022 and the balance in subsequent years.

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Ford Focuses On Business Solutions Unit: The Dearborn, Michigan-based company said it plans to significantly expand its Chennai-based Ford Business Solutions team and bring to market some of its iconic global vehicles and electric SUVs.

The business solutions team in India comprises 11,000 team members, and the company said it plans to expand the unit in support of the Ford+ plan to transform and modernize Ford globally.

What's Next For Ford In India? Ford said it will begin importing and selling its iconic vehicles, including the Mustang coupe. Customers in India also will benefit longer-term from the company's plan to invest more than $30 billion globally to deliver all-new hybrid and fully electric vehicles, such as the Mustang Mach-E, Ford said. 

The company plans to stop sales of current products such as the Figo, Aspire, Freestyle, EcoSport and Endeavour once existing dealer inventories are sold.

Ford said 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.

The company plans to maintain a smaller network of suppliers to support engine manufacturing for exports and work closely with other suppliers to ensure a smooth wind-down of vehicle manufacturing. India-based suppliers will continue to provide parts for its global products. The suppliers and vendors supporting Ford Business Solutions will also continue to support the business as normal.

F Price Action: Ford shares were down 1.57% at $12.82 at last check Thursday. 

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Photo: the grill of a Ford Ranger.