Ford would stop manufacturing vehicles in Brazil this year with the loss of up to 5,000 jobs, the company said on Monday, in a bid to bring its South American operations back into the dark.
The U.S. automaker has been producing vehicles in Brazil for more than a century, but its operations there have caused a cash flow since the country’s economic downturn in 2013.
“In Brazil, and in South America more broadly, the market simply will not support and support our cost structure in the region,” Ford said.
Workers will immediately stop making vehicles at Ford’s Camaçari and Taubaté factories, although some will continue to manufacture parts needed for maintenance. A third factory in Horizonte will cease operations by the end of the year.
As a result, the company would no longer sell the EcoSport SUV, the Ka subcompact car or the T4 all-terrain vehicle in Brazil, he said.
Ford South America’s losses fell to $ 386 million in the first nine months of 2020, from $ 527 million for the same period in 2019, but executives said it was not enough.
Lyle Watters, president of Ford’s international markets division and group, said in a note to employees in the region that the devaluation of regional currencies had “increased industrial costs beyond recoverable levels, and the global pandemic has further amplified the problems, resulting in even higher inactivity. capacity and declining demand for vehicles in South America, especially Brazil ”.
Overall vehicle sales in Brazil fell to 2.1 million units in 2020 – a 26% drop from 2019 – with a return to 2019 levels not expected within three years.
Meanwhile, production fell by almost a third in 2020. The country’s auto industry only used 40% of its production capacity last year.
Mr Watters said in his memo that Ford was working with the unions to “mitigate the effects” on 5,000 workers at the three factories.
This move in Brazil is the latest step in a $ 11 billion restructuring effort launched in 2018, through which it is trying to achieve an 8% margin on profit before interest and taxes.
In North America, the company stopped making cars, except the Mustang, in favor of more profitable pick-ups and sport utility vehicles. In Europe last year, he cut 12,000 jobs. And less than two weeks ago, it scuttled joint venture plans with Indian automaker Mahindra, in order to rethink its capital allocation priorities.
The cost of restructuring in Brazil will translate into pre-tax charges of approximately $ 2.5 billion in 2020 and $ 1.6 billion in 2021.
Ford’s factories in Argentina and Uruguay will remain open, as will some Brazilian operations, including its product development center, test site and regional headquarters in São Paulo.