Ford to Close Three Manufacturing Plants in Brazil

On Monday Ford Motor Co said that this year the company will shut down three of its plants in Brazil and will also take pretax charges of about $4.1 billion as the Coronavirus pandemic increased the firm's underuse of its production capacity.

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Ford officials also said that the closure of the plants is part of the brand's strategy to achieve 8 per cent global operating margins. Ford, which had its operating units in Brazil for many years now, has begun discussing with its unions about the layoffs.

On Monday Ford Motor Co said that this year the company will shut down three of its plants in Brazil and will also take pretax charges of about $4.1 billion as the Coronavirus pandemic increased the firm's underuse of its production capacity. The company will stop the production immediately at Ford's plants in Taubate and Camacari, with the production continuing in some parts for a few months to give support to the inventories for aftermarket sales. The Troller plant in Belo Horizonte, Brazil, will continue its production until the fourth quarter.

According to Ford officials, this action has been taken as a part of the $11 billion global restructurings that had been forecasted by the company, of which it had accounted for $4.2 billion through the third quarter of 2020. The shares of Ford closed up more than 3 per cent. On a conference call with some of the reporters, Ford's spokesman, T.R. Reid said that the shutting down of the plant will affect around 5,000 employees, mostly in Brazil.

According to the company, due to a fall in the industry vehicle sales by 26 per cent in Brazil last year, sales and are not expected to bounce back to 2019 levels until the year 2023 with an emphasis on a lesser profitable fleet sales. Ford Chief Executive Jim Farley said that the brand knows that these are difficult yet necessary actions that need to be taken for a healthy and sustainable business. He further said that they are moving to a slimmer, asset-light business model by closing production in Brazil.

Ford officials also said that the closure of the plants is part of the brand's strategy to achieve 8 per cent global operating margins. Ford, which had its operating units in Brazil for many years now, has begun discussing with its unions about the layoffs. Brazil's Economy Ministry also lamented Ford's decision to stop manufacturing in Brazil and said there is a need for better reforms to improve the business climate in the country.

In Camacari, which is in northeastern Brazil, there was an emergency meeting at the Ford factory gates on Tuesday to take a stance on the loss of 4,059 jobs. The union leader Julio Bonfim addressed the workers by saying that this is a very hard blow and it took us by surprise. He also said that they had never imagined that Ford could close its factories in the country.

The shutting down of the plants also saw another retreat by Ford in a developing market after the Dearborn, Michigan-based company last month closed its joint venture with Mahindra and Mahindra Ltd. Ford will now also end sales in South America of Ka subcompact, EcoSport SUV, car and T4 SUV once the inventories are sold off. Plants in Argentina and Uruguay have been retained by the company. Of the $4.1 billion in charges, the company said that it expects to record about $2.5 billion in the fourth quarter of the year 2020 and around $1.6 billion in 2021. The charges include about $1.6 billion in non-cash charges and the remaining in cash, primarily in 2021 to cover all the layoffs.

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