US auto major Ford Motor Co shuts its manufacturing plants in Sanand and Chennai - Vibes Of India

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US auto major Ford Motor Co shuts its manufacturing plants in Sanand and Chennai

| Updated: September 10, 2021 12:49

The small town of Sanand in Gujarat turned into a major automotive hub with the entry of Tata, Suzuki, Ford, Honda and Hero MotoCorp, who operated their plants from in and around Sanand.

But Sanand perhaps is losing its sheen as major companies make an exit. The announcement on Thursday was made by US auto major Ford Motor Co to shut its two manufacturing plants in India – first Sanand and then Chennai. The decision to shut their plants comes after having accumulated losses of over 10 years and a lack of growth. At least 4,000 employees are likely to be affected by the move.

The company had invested about USD 2.5 billion at its Chennai (Tamil Nadu) and Sanand (Gujarat) plants, will stop selling vehicles such as the EcoSport, Figo and Aspire which are produced from these plants. It further adds, going ahead, it would only sell imported vehicles like Mustang in the country.

Ford is forced to do a restructuring so as to create a profitable business in India. PM Modi took to Twitter on July 28 to announce the hosting of Ford outside America.

Which other global automotive brands have exited?

This is perhaps the third major exit of local manufacturing operations in India by a global automotive brand.

Peugeot surrendered land of its 4000 crores proposed plant in Sanand in 2012. The US giant General Motors, which entered India just a few years before Ford, stopped selling cars in India in 2017. Thus, exiting from the soil.

General Motors too couldn’t see a turnaround in its fortunes even after struggling for over two decades to make a mark. The company sold its Halol plant in Gujarat to MG Motors, while it continued to run its Talegaon plant in Maharashtra for exports. They ceased production there as well in December 2020. 

The announcement by Ford Motor Co on September 9, makes it the third exit of a global automotive brand, from India.

Not to forget to mention, exit of Tata Motors’ small car project Nano Plant that was parked at Sanand, later moved to West Bengal.

History of Ford’s investment

Ford India has an installed manufacturing capacity of 6,10,000 engines and 4,40,000 vehicles a year. It also exported its models such as Figo, Aspire, and EcoSport to over 70 markets around the world.

In January 2021, Ford Motor Co and Mahindra & Mahindra had decided to call off their previously announced automotive joint venture. They decided to continue independent operations in India.

Interestingly, in October 2019, the two companies had announced an agreement under which Mahindra & Mahindra would acquire a major stake in a wholly-owned arm of Ford Motor Co (FMC), which will take over the automotive business of the US auto major in India.

Under the new entity, markets were to be developed and Ford brand vehicles would be distributed in India while selling both – Mahindra and Ford – cars in the emerging high-growth markets.

As per the agreement, Mahindra & Mahindra was to acquire a 51 per cent stake in Ardour Automotive Private Ltd, presently a wholly-owned subsidiary of Ford Motor Company Inc, the USA for around Rs 657 crore. The remaining 49 per cent equity shareholding in Ardour was to be held by FMC and/or any of its affiliates.

The proposed acquisition included vehicle manufacturing plants of Ford India at Chennai and Sanand but excluded the separate powertrain facility in Sanand. The latter is essentially used for FMC’s global markets, and the powertrain division of FIPL also did not form part of the deal.

What does FADA have to say?

Vinkesh Gulati, President of The Federation of Automobile Dealers Associations (FADA) said, “The Auto Retail fraternity is shocked to hear another US Auto Major, Ford India’s announcement where it has said that it will shut down production with immediate effect. While trying to handle dealer anxiety, Ford India President & MD, Anurag Mehrotra informed and has assured me that they will adequately compensate dealers who continue to offer vehicle service to customers.”

Gulati added, “Though this is a good beginning, it is not enough as there are 170 dealers who in turn have 391 outlets and have invested Rs 2,000 crores for setting up their dealerships. While Ford India employs 4,000 people, dealerships employ around 40,000 people without displacing them from their home locations thus being continuously skilled and up-skilled all this while.” Ford India Dealers currently hold 1,000 vehicles which amount to Rs 150 crores via inventory funding from reputed Indian Banks. They also carry Demo Vehicles which are 100’s in numbers. Moreover, Ford India also appointed multiple dealers until five months back. Such dealers will be at the biggest financial loss in their entire life.

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