Ford drives out of deal to sell TamiNadu plant to JSW

Ford drives out of deal to sell TamiNadu plant to JSW

The move fueled rumors that the US business, which left the third-largest auto market in the world more than two years ago, may be thinking about returning. Ford exited India in September 2021 due to growing losses and a decline in the passenger vehicle industry following the COVID-19 outbreak, putting the company’s Maraimalai Nagar plant up for sale.

Following the completion of a deal with the Sajjan Jindal-led JSW Group, Ford Motor Co. abruptly withdrew plans to sell its Tamil Nadu facility, which is its last remaining industrial site in the nation, according to people with knowledge of the situation.

The move fueled rumors that the US business, which left the third-largest auto market in the world more than two years ago, may be thinking about returning.

“We continue to explore alternatives for our manufacturing facility in Chennai and have nothing further to share,” a Ford India spokesman stated in an email. JSW opted not to respond.

During Ford’s exit from India due to growing losses and the downturn that hit the passenger vehicle industry during the COVID-19 outbreak in September 2021, the company’s Maraimalai Nagar facility was put up for sale.

JSW has finalized an agreement to purchase the Ford facility for approximately USD 100 million. JSW recently announced the purchase of a 35% stake in a joint venture with SAIC. However, one of the people with knowledge of the continuing talks stated that Ford “called off the deal and is no longer looking to sell the factory” earlier this month. MG Motors India is owned by SAIC.

Other competitors One such company rumored to have been in the running for the Ford facility was VinFast, a Vietnamese e-carmaker that is now finalizing its plan for entering India and seeking a manufacturing footprint.

Although they had shown interest, Mahindra & Mahindra did not pursue the chance with the same zeal.

Situated near the Chennai port, the Ford plant occupied 350 acres and could produce 150,000 automobiles and about 340,000 engines annually. It closed in July of 2022.

To increase the manufacture of electrical vehicles (EVs), Tata Motors paid INR 725.7 crore to Tata Passenger Electric Mobility Ltd in January for the acquisition of Ford’s Sanand factory in Gujarat. Along with the plant’s machinery and equipment, land and buildings were also acquired, and all qualified staff were transferred.

In the company’s September 2021 statement, Ford refrained from calling its exit a departure, instead describing it as 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 corporation had declared that it would continue to operate its technological services and engine-making divisions. During the preceding ten years, Ford had accrued operating losses exceeding USD 2 billion, and the demand for new cars was not as strong as anticipated. Since the pandemic ended, the Indian market has experienced a dramatic resurgence, with sales surging to all-time highs. Up to July 2022, the company kept up production of engines for export and automobiles in India.

The closed Ford Chennai facility was intended to help JSW achieve its goal of moving toward electric vehicles—a goal that Jindal has long had.

Ford India achieved a profit of INR 505 crore in FY23, primarily from the export of engines and automobiles, before the eventual closure of its vehicle manufacturing activities in the nation.

Auto industry experts stated that several international automakers have revised their India outlooks for both electric and internal combustion engine (ICE) vehicles due to the country’s fast growth in the EV category. Kumar Galhotra, an Indian national, was named COO by Ford Motor Company in October. He will be accountable to Jim Farley, the company’s president and CEO. Galhotra was previously president of Ford Americas and the company’s overseas markets in addition to serving as president of Ford Blue.

The ailing corporation had few options after the epidemic and a divorce from Mahindra & Mahindra even before the joint venture could succeed. Ford Motor Company and Mahindra stated in January 2021 that they have concluded their talks to form an INR 1,925 crore automobile joint venture (JV), which had been launched in October of 2019. The American carmaker was then expected to carry on with its separate activities in India. They listed how the global pandemic has affected business and economic conditions since the agreement was initially announced. The two businesses collaborated for the second time on this occasion. began in 1996, but they broke up in 1998 when Ford increased their share of the joint venture to 72%.

Indeed, industry observers claim that even before starting talks with M&M in 2019, it had been reconsidering its activities in India. Officials from the corporation stated during the 2021 restructuring announcement that it had chosen to stop manufacturing after weighing all of its options, including contract manufacturing.

Ford was chosen for the government’s Productive Linked Incentive Scheme together with twenty other applications. It chose to withdraw from the program in May 2022, though.

Following the announcement of a new deal with United Auto Workers (UAW) that will result in an outlay of USD 8.8 billion over the next four years or an increase in manufacturing costs of USD 900 per car, Michigan-based Ford dropped its projection for the year by USD 1 billion last month.

The business declared that it could see a USD 10.5 billion decline in adjusted operating earnings this year. It had stated earlier in July that the amount would reach up to USD 12 billion, but a fourth of the way into the strike, it lowered the forecasts.

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