Ford is to shutter three manufacturing plants in Brazil this year in a major restructuring move.
Ford Brazil will cease production at its Camaçari, Taubaté and Troller plants during 2021, as it said the ‘COVID-19 pandemic amplifies persistent industry idle capacity and slow sales that have resulted in years of significant losses’.
Ford said it will serve the region from its global product portfolio, including vehicle lines such as the Ranger pickup built in Argentina, new Transit van, Bronco and Mustang Mach 1. The company also said it plans to accelerate the introduction of several new connected and electrified models. Ford also maintains full customer support operations with sales, service, aftermarket parts and warranty support in Brazil and South America. Ford will also maintain its product development center in Bahia, its proving ground in Tatuí, São Paulo, and its regional headquarters in São Paulo.
“With more than a century in South America and Brazil, we know these are very difficult, but necessary, actions to create a healthy and sustainable business,” said Jim Farley, Ford president and CEO. “We are moving to a lean, asset-light business model by ceasing production in Brazil and serving customers with some of the best and most exciting vehicles in our global portfolio. We will also accelerate bringing our customers the benefits of connectivity, electrification and autonomous technologies to efficiently address the need for cleaner and safer vehicles well into the future.”
Ford said it would immediately begin working closely with its unions and other stakeholders to develop an equitable and balanced plan to mitigate the impacts of ending production.
“Our dedicated South America team made significant progress in turning around our operations, including phasing-out unprofitable products and exiting the heavy truck business,” said Lyle Watters, president Ford South America and the International Markets Group. “In addition to reducing costs across the business, we launched the Ranger Storm, Territory and Escape, and introduced innovative services for our customers. While these efforts improved results over the past four quarters, the sustained unfavorable economic environment and the additional burden of the pandemic made it clear that much more was necessary to create a sustainable and profitable future.”
Ford also said it is actively evaluating its businesses around the world, including in South America, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8% company adjusted EBIT margin and generate consistently strong adjusted free cash flow. Ford’s plan calls for developing and delivering high-quality, high-value, connected vehicles – increasingly electric vehicles – and services that are affordable to an even broader range of customers and profitable for Ford.
Ford said it is moving quickly to turn around its automotive business and modernizing all aspects of the company.
“We will work earnestly with unions, employees and other stakeholders to develop measures to help deal with the difficult impact of this announcement,” Watters continued. “I want to emphasize that we are committed to the region for the long-term and will continue to offer customers full sales, service and warranty support. This is especially true as we bring to market a robust lineup of exciting connected and electrified SUVs, pickups and commercial vehicles from within and outside of the region.”
Watters added that, in addition to the recently confirmed production of the next-generation of Ranger and the arrival of the Bronco, Mustang Mach 1 and Transit van, Ford plans to announce other all-new models, including a new plug-in vehicle. This includes expanding connected services and introducing new automated and electrified technologies to South America.
Production will cease immediately at Camaçari and Taubaté in Brazil, with some parts production continuing for a few months to support inventories for aftermarket sales. The Troller plant in Horizonte, Brazil, will continue to operate until the fourth quarter of 2021. As a result, the company will end sales of EcoSport, Ka and T4 once inventories are sold. Manufacturing operations in Argentina and Uruguay and the sales companies in other South America markets are not affected.
Ford will continue to facilitate possible reasonable alternatives for interested parties to take over available production facilities.
In connection with this announcement, Ford expects to record pre-tax special item charges of about $4.1 billion, including about $2.5 billion in 2020 and about $1.6 billion in 2021. The charges will include about $1.6 billion of non-cash charges related to writing-off certain tax receivables and for accelerated depreciation and amortization. The remaining charges of about $2.5 billion will be paid in cash, primarily in 2021, and are attributable to separation, termination, settlement and other payments.
The Ford Brazil plant closures will directly impact around 5,000 jobs in Brazil. The retrenchment from Ford in Brazil follows the recent announcement that Ford would back out of plans to work in a JV with Mahindra in India.