Ford To Close Production Facilities In Brazil

On Monday, Ford Motor Company stated that will close its three production facilities in Brazil this year and will take pretax charges of about $4.1 billion as the Covid-19 pandemic amplified the automaker’s underuse of its facilities. Effective immediately, production will cease at Ford’s plants in Camacari and Taubate, with some parts’ production continuing for a few months to support inventories for aftermarket sales. The Troller plant in Belo Horizonte, Brazil will continue to operate until the end of the year.

Officials from Ford says that the decision was taken as part of the $11 billion global restructurings previously stated by the automaker, of which it had accounted for $4.2 billion through the third quarter of 2020. Ford shares closed up more than 3%. The closure of the plants affects about 5,000 employees, mostly from Brazil, Ford spokesman T.R. Reid said on a conference call with reporters. Industry vehicle sales fell 26% in Brazil last year and are not expected to rebound to 2019 levels until 2023 with an emphasis on less profitable fleet sales, Ford said.

"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." Ford officials stated that the plant closures are part of the company’s strategy to achieve 8% global operating margins. Ford has been operating in Brazil for over a century and has started discussions with its unions and others about the layoffs. Brazil’s Economy Ministry lamented Ford’s discussion to end production in the country and stated it reinforces the need for reforms to improve the business climate.

In Camacari, in northeastern Brazil, the union called an emergency meeting at the factory gates at the first shift on Tuesday to take a stance on the loss of 4,059 jobs. "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. 

The closures marked another retreat by Ford from a developing market after the Michigan based company last month called off its auto joint venture with Mahindra and Mahindra in India. As a result of the closure of the production facilities, Ford will cease sales of the EcoSPort SUV, Ka compact car and the T4 SUV once inventories are sold though Ford will retain plants in Argentina and Uruguay. Ford said it will maintain its product development centre in Bahia, its proving ground in Tatui, Sao Paulo, and its regional headquarters in Sao Paulo. Of the $4.1 billion in charges, Ford said it expects to record about $2.5 billion in the fourth quarter of 2020 and about $1.6 billion in 2021. The charges include about $1.6 billion in non-cash charges and the rest in cash, primarily in 2021 to cover the layoffs.