Ford Motor Co announced it will close its three plants in Brazil this year and take pre-tax charges of about USD4.1 billion as Covid-19 exacerbated the company’s under utilisation of its manufacturing capacity.
In a statement, Ford Chief Executive Jim Farley said these are very difficult but necessary, actions to create a healthy and sustainable business. The plant closures are part of the company’s strategy to achieve 8% global operating margins.
Plants in Camaçari and Taubaté, will cease production immediately, while with some parts production continuing for a few months to support inventories for aftermarket sales. Meanwhile, the Troller plant in Belo Horizonte will continue to operate until the fourth quarter.
According to Ford officials, the action was part of the USD11 billion global restructuring forecast by the US automaker, of which it had accounted for USD4.2 billion through the third quarter of 2020.
Ford has operated in Brazil for more than a century and started to discuss union and layoffs. The plant closures will affect about 5,000 employees, mostly from Brazil, according to T.R Reid, a Ford spokesman.
The car maker said 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.
The closures marked another retreat by Ford in a developing market after the Dearborn, Michigan-based company last month called off its auto joint venture with India’s Mahindra and Mahindra Ltd.
Due to the plant closures, Ford will end sales in South America of EcoSport SUV, Ka subcompact car, and T4 SUV once inventories are sold.