Ford takes EcoSport and Ka out of production and stops making cars in Brazil after 100 years

JANUARY 12, 2021

100 years after the inauguration of its first plant in that country, Ford announced that, in 2021, it will stop manufacturing vehicles in Brazil. This decision implies the closing of three industrial plants and, according to the U.S. automaker, it expects that its implementation will mean pre-tax charges of US$ 4.1 billion on its balance sheet.

Brazil has always been, by volume, Ford's largest operation in South America. So important was this country in the history of the giant of Dearborn, Michigan, that Henry Ford himself decided to establish Fordlandia there, an ambitious project located in the middle of the Amazon, with which, between the end of the '20s and the beginning of the '30s, he sought to ensure the supply of rubber.

However, despite the end of its industrial operations, the country will continue to head its regional office and also maintain its design center.

The initiative is part of a US$ 11 billion restructuring that the automotive giant activated to recover 8 points of operating margin. This plan includes the strategy of specializing as a manufacturer of commercial vehicles, pick-ups and sport utility vehicles (SUVs). Consequently, this implies ceasing the assembly of passenger cars, the main range of products that Ford used to make in Brazil.

To that country, it also had assigned the manufacture of trucks, another market that will leave aside the giant of the oval. In November, in fact, he sold his facility in São Bernardo do Campo, São Paulo, where he produced this type of vehicle.

"Ford Motor Company announced today that it will serve customers in the South American region with a portfolio of exciting SUVs, pick-ups and commercial vehicles that are connected to and increasingly electrified from Argentina, Uruguay and other markets, at the same time that Ford Brazil ceases its manufacturing operations in 2021," informed the company, through a press release.

The shutdown will involve the closure of the Taubaté plant, where he made engines and gearboxes, and the Camacarí plant, a giant located 75 kilometers north of the city of Salvador and which, a decade ago, was his big bet in South America: a complex with capacity for 250,000 cars per year, home to the aforementioned "Amazon Project", which gave birth to the first generations of EcoSport, Fiesta and FiestaMax. He invested US$ 4 billion in this factory and has made more than 3 million vehicles since 2001. These days, he was only making the EcoSport, the Ka and its sedan version (Ka+).

The third factory that Ford will now close in Brazil is the one in Horizonte, where it makes the Troller (T4).

"With more than a century in South America and Brazil, we know that these are very difficult but necessary actions to create a healthy and sustainable business," said Jim Farley, president and CEO of Ford.

"We are moving towards an agile and lightweight business model, ceasing production in Brazil and serving customers with some of the best and most exciting vehicles in our global portfolio," he added.

"We will also accelerate the availability to our customers of the benefits of connectivity, electrification and autonomous technologies to efficiently address the need for more environmentally friendly and safer vehicles in the future," he completed.

"Ford will serve the region with its global product portfolio, including some of its most popular vehicle lines, such as the new Ranger pickup (manufactured in Argentina), the new Transit, the Bronco, Mustang Mach-1, and plans to accelerate the introduction of several new connected and electrified models," the company said in its statement.

"Ford will continue to serve its customers with sales, parts, service and warranty operations in Brazil and South America. Ford will also maintain its Product Development Center in Bahia, its Test Field in Tatuí (São Paulo) and its regional offices in São Paulo", he clarified.

The company also informed that it will start working with unions and other stake-holders on the consequences of the closures. "Our dedicated South American team made significant progress in transforming our operations, including discontinuing unprofitable products and exiting the heavy truck business," said Lyle Watters, president of Ford South America and the International Markets Group.

"In addition to reducing costs in all aspects of the business, we launched Ranger Storm, Territory and Kuga and introduced innovative services for our clients. While these efforts improved results over the past four quarters, the continuing unfavorable economic environment and the additional burden of the pandemic made it clear that much more was needed to create a sustainable and profitable future," he added.

A month ago, as part of this transformation, Ford announced a $580 million investment to reconvert its Argentine plant to produce the next Ranger, a pick-up that the General Pacheco factory has been making since its first generation in 2003.

It will begin assembly in 2023 and plans a minimum production floor of 60,000 units, of which two thirds will be for export.

As part of this strategic restructuring, in 2019 Pacheco had already suffered the loss of the Focus, a sedan that had been producing since 2001.

In the statement, Watters added that, in addition to the recently confirmed production of the next generation Ranger and the arrival of the Bronco -relaunched SUV brand-, the Mustang Mach-1 and the Transit (a utility vehicle that will be assembled in Uruguay, with an investment of US$50 million), Ford plans to announce more new models, including a new plug-in vehicle.

"This includes expanding connected services and introducing new autonomous and electrified technologies into the markets," he said.

Camacarí and Taubaté will cease operations immediately, with the production of some parts for a few months so as not to totally disrupt the replacement market. "The Troller plant, in Horizonte, will continue to operate until the fourth quarter of 2021," he added.

"As a result, the company will finalize sales of EcoSport, Ka and T4 once inventories are depleted," he said.

"Manufacturing operations in Argentina and Uruguay, and sales subsidiaries in other South American markets will not be affected," he said. He added that, of the US$ 4.1 billion in charges, US$ 2.5 billion will correspond to 2020 and US$ 1.6 billion to 2021. This last figure is due to the decrease of tax credits and accelerated depreciations and amortizations due to the closing of operations.

The US$ 2.5 billion, meanwhile, is calculated by cash payments -mainly during this year- for dismissals, resignations, agreements and other disbursements.

Source: El Cronista

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