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Explained: Why Ford is shutting manufacturing plants in India

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The company plans to keep selling CKU and CBU cars but 4,000 workers are expected to lose their jobs. Ford will continue to offer aftermarket service and support to its customers in India

Explained: Why Ford is shutting manufacturing plants in India
American automobile giant Ford Motor Company announced on September 9 that it will shut down its plants in India. The manufacturing of vehicles for domestic sales will cease immediately, while vehicles meant for exports will continue to be manufactured till 2022. 
Even as the company winds down its manufacturing operations, it said it will continue to provide aftermarket service and support to its customers in India.
“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,” said Jim Farley, Ford Motor Company’s President and CEO. “Despite investing significantly in India, Ford has accumulated more than $2 billion of operating losses over the past 10 years and the demand for new vehicles has been much weaker than forecast.”
Ford’s rationale
Ford had to take the decision to close its plants in India due to unviable business conditions. The company had recorded 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 alone. With poor sales and weak exports, the troubles faced by the company had been compounded by the COVID-19 crisis. The company had only managed to sell 2,790 units in June this year, compared to 2,872 units in June 2020.
Another reason behind the soft exit was Ford’s disastrous deal with Mahindra & Mahindra (M&M). The deal had been signed between the two companies in October 2019 before being called off in January 2021, without much to show for it.
"Exploring the partnership with Mahindra is the biggest mistake Ford has made in India in more than 20 years of travel, and that too, not once but twice," a source told The Economic Times.
Ford had been trying to find new partners to stay afloat in India at least till 2023, when its two new SUVs built on platforms codenamed  B744 and B745 would have been unveiled. Reports indicated that Skoda-Volkswagen Group, Hyundai Motor, Tata Motors, Shanghai Automotive or MG Motor, Changan Vehicles, and a few electrical car (EV) startups, in addition to Ola Electric, were being considered by Ford as potential partners.
How many employees in India will be impacted
While Ford is closing down its domestic manufacturing, the Maraimalai Nagar facility in Chennai will be operational till Q2 2022 and Sanand till Q4 2021, for the manufacturing of vehicle and engine exports.
Ford will also continue to keep its doors open for its Ford Business Solutions operations. The company aims to expand its 11,000 strong workforce to include software developers, data scientists,  R&D engineers, and finance and accounting professionals to support its global operations and for the modernisation of the brand.
Around 4,000 Ford factory employees will lose their jobs. The company said at least 600 workers from the Sanand Factory “will continue to support Ford’s business in India.”
Ford's future plans
The company will aims to develop India into a larger market, planning to export CBU and CKU units, instead of indigenously manufacturing vehicles. Ford has unveiled plans to deliver new fully electric and hybrid vehicles including the Mustang Mach-E globally, using new strategies and the support structure of Ford Business Solutions in India.
The company will also be working closely with its dealer networks to maintain its part depots in Delhi, Chennai, Mumbai, Sanand and Kolkata in order to continue providing aftermarket support for its Indian customers.
What happens to Sanand assembly plant
The company expects to keep its Sanand Engine Plant open for some time to support global engine exports. The 500 employees of the plant, which produces the engines for the globally popular Ranger pickup truck, will still be operating the plant in some capacity.
The company’s factories had a total annual capacity of four lakh units but with dwindling sales and bleak future prospects, the plants had been operating at less than 20 percent capacity for months now.
Ford latest to head for the exit
With its ramp down of domestic production, Ford became the latest name in the long line of global automobile players to exit the Indian market in some capacity. Popular motorcycle manufacturer Harley Davidson shuttered its Indian operations last year while Italian automobile manufacturer Fiat also exited the market in 2019, just seven years after its entry. M&M subsidiary Ssangyong Motor Company only lasted long enough to just see one vehicle hit the market before it had to pull out, while General Motors closed its doors in India after 13 years because of low sales and expounding losses.