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ford: Ford drives out of deal to sell Tamil Nadu plant to JSW

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Ford Motor Co. unexpectedly abandoned plans to sell its Tamil Nadu plant, its sole remaining factory site in the country, after finalising a deal with the Sajjan Jindal-led JSW Group recently, said people with knowledge of the matter.

The decision fuelled speculation that the US company may be considering a re-entry into the world’s third auto largest market after exiting over two years ago.

A Ford India spokesperson said in an email: “We continue to explore alternatives for our manufacturing facility in Chennai and have nothing further to share.” JSW declined to comment.

The company’s Maraimalai Nagar-based plant has been on the block after Ford got out of India amid mounting losses and the slowdown that gripped the passenger vehicle market after the Covid-19 pandemic in September 2021.

JSW, which recently announced the purchase of a 35% stake in a joint venture with SAIC, had finalised an agreement to buy the Ford plant for around $100 million. But, earlier this month, Ford “called off the deal and is no longer looking to sell the factory,” said one of the persons privy to the ongoing discussions. SAIC runs MG Motors India.

ETB-1-20122023

Other contenders
Vietnamese e-carmaker VinFast, which is in the process of firming up its India entry strategy and is looking for a manufacturing footprint, was another company said to have been in the fray for the Ford plant. Mahindra and Mahindra had also expressed interest but did not pursue the opportunity with the same vigour.

Strategically located near Chennai port and spread across 350 acres, the Ford plant had an annual capacity of 150,000 cars and almost 340,000 engines. It’s been shut since July 2022.

In January, Tata Motors acquired Ford’s Sanand plant in Gujarat through its subsidiary Tata Passenger Electric Mobility Ltd for Rs 725.7 crore to boost electrical vehicle (EV) production. That acquisition included land and buildings, the plant along with machinery and equipment, and the transfer of all eligible employees.

Ford had stopped short of saying its departure was an exit in the company’s September 2021 announcement and maintained it was a “restructuring of the business to deliver a sustainably profitable business longer-term and allocate its capital to grow and create value in the right areas.” The company had said it would retain the engine making and technology services businesses. Ford had accumulated more than $2 billion of operating losses over the previous 10 years and demand for new vehicles then was weaker than forecast. The Indian market has revived sharply since the end of the pandemic, with sales zooming to record levels. The company continued to make cars in India and engines for exports till July 2022.

The shuttered Ford Chennai plant was supposed to facilitate JSW’s planned entry into EVs, an aspiration Jindal has been harbouring for some time.

Ford India broke into profits of Rs 505 crore in FY23, led by exports of vehicles and engines before it finally shuttered the vehicle making operations in the country.

Auto industry executives said the rapid growth of the EV segment in the country has prompted several global auto makers to re-evaluate their India outlook for both electric and ICE or internal combustion engine vehicles. In October, Ford Motor Co. appointed India-born Kumar Galhotra as COO, reporting to the company’s president and CEO Jim Farley. Previously, Galhotra was president, Ford Blue, and before that president of Ford Americas and the company’s international markets group.

The pandemic and a subsequent divorce with Mahindra & Mahindra even before the joint venture could take off, left little option for the beleaguered company. In January 2021, Ford Motor Co and Mahindra said that they have ended discussions to create a Rs 1,925 crore automotive joint venture (JV) that was announced in October 2019. The American automaker was to then continue its independent operations in India. They cited changes in the global economic and business conditions, caused, in part, by the global pandemic, since the agreement was first announced. This was the second time that the two companies came together. The first being in 1996 but they parted ways in 1998 after Ford hiked its stake to 72% in the JV.

To be sure, industry watchers say it had been rethinking its India operations even before it had initiated discussion with M&M back in 2019. It decided to cease manufacturing after considering all options, including contract manufacturing, the company’s officials had said while announcing the restructuring in 2021.

Ford was one among the 20 other applicants to be selected for the government’s Productive Linked Incentive Scheme. However, it opted out of the scheme in May 2022.

Last month Michigan based Ford cut its guidance for the year by $1 billion afer announcing a new contract with United Auto Workers (UAW) that will lead to an $8.8 billion outgo over the next 4 years, translating to an $900 cost bump in making each car or truck. The company announced that it expects this year’s adjusted operating earnings to take upto a $10.5 billion tumble. Earlier in July, it had said the number would rachet upto $12 billion, before scaling down the estimates a quarter later during the strike.

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