Daily Management Review

Ford Will Shut Three Plants In Brazil And Take A Pretax Charge Of $4.1 Billion


United States auto giant Ford Motor Co will take a pretax charges of about $4.1 billion from its decision to close down its three production units in Brazil this year with the company not being able to utilize the capacity at a number of its plants because primarily because of the Covid-19 pandemic.
The company said that at the factories at Camaçari and Taubat in Brazil, there will be an immediate stop in production with some production being maintained for the next few months for supporting inventories for after sale services in the market. The company has decided to continue production till the fourth quarter of the current year at the Troller plant in Belo Horizonte, Brazil.
These measures were a part of the company global restructuring strategy aimed to save on $11billion which the company had previously announced, said Ford officials. The company had already achieved to save on $4.2 billion in the third quarter of 2020.
Ford spokesman T.R. Reid said on a conference call with reporters that about 5,000 employees of the company would be affected by the closure of the plants most of which are located in Brazil. 
Ford said that last year, there was a drop of 26 per cent in vehicle sales in Brazil and the industry and analysts do not expect to see a rebound in demand and sales to 2019 level till 2023 even though it would be driven by a focus on sales of less profitable vehicles.
"We know these are very difficult, but necessary, actions to create a healthy and sustainable business," Ford Chief Executive Jim Farley said in a statement. “We are moving to a lean, asset-light business model by ceasing production in Brazil."
The closure of the manufacturing units of the company is a part of the target of the company to achieve operating margins of 8 per cent globally, Ford officials said. Discussions with the trade unions and others about the layoffs because of the closure of the plants have been initiated by the company in Brazil. Ford has bene present in Brazil for more than a century.
Ford’s decision to close down manufacturing in the county was lamented by Brazil's Economy Ministry while also saying that the decision reflected the need for enhancement of the business climate in the country.
To take a stance on the loss of 4,059 jobs, an emergency meeting at the factory gates at the first shift on Tuesday was called by the union at the Camaçari factory of Ford in northeastern Brazil.
"This very hard blow took us by surprise. We never imagined that Ford could close its factories in Brazil," said union leader Julio Bonfim in a video message to the workers.
Following the end of its joint venture with India's Mahindra and Mahindra Ltd last month, this decision of the Dearborn, Michigan-based company marks a further resterat of it from developing markets.
The sale of EcoSport SUV, Ka subcompact car and T4 SUV will come to an end in South America once the inventories are sold off following the closure of the plants.