Ford reaches out to half a dozen rival carmakers to reboot India operations


US carmaker Ford has reached out to at least half a dozen automakers to explore various options to sustain its Indian operation of 25 years after its failed partnership with Mahindra & Mahindra, multiple people aware of the developments told ET.

Ford India has approached Skoda-Volkswagen Group, Hyundai Motor,

, Shanghai Automotive or MG Motor, Changan Automobiles, and some electric vehicle (EV) startups including Ola Electric to explore partnerships, contract manufacturing opportunities, or even sale of one of its facilities, as it looks for ways to meet the mid-term target of 8% EBIT (earnings before interest and taxes) margin by 2023 announced by global CEO Jim Farley, they said.

With export volumes falling and Indian operations struggling with a dated product portfolio, Ford is sure to shut or sell one of its plants, sources said.

In the worst-case scenario, the US carmaker may shut both its plants and turn its Indian unit into a niche operation, selling CKD (completely knocked-down) versions of premium models Endeavour, Ranger, and Mustang Lincoln while keeping doors open for EVs, they said.

The best scenario for the company would be to find a partner wherein it may sell stake or explore a joint venture or find ways to build, scale and sustain operations till new SUVs based on platforms codenamed B744 and B745 hit the road in 2023, sources said.

A decision on the future course of action is likely to be taken within a couple of months, they said.

Emails sent to Skoda-Volkswagen, Tata Motors, Hyundai, Ola, Changan and MG did not elicit any response at the time of going to press.

A Ford India spokesperson said the company would not like to comment on “speculations”.

“India is an important market for Ford, with more than 16,000 employees, as well as being a source of our global powertrains for Ranger,” the person said. “We are continuing to assess our capital allocations and expect to have an answer in the second half of the year. We have nothing additional to share at this point.”

With the likes of Volkswagen – Ford has explored alliance talks, with Hyundai Motor, Tata Motors it has explored contract manufacturing possibilities, with M G Motor and Changan, Ford has even explored selling one of its facilities. With Ola Electric, Ford is exploring sharing Figo vehicle architecture for EVs including a contract manufacturing opportunity, according to several people in the know.

ET spoke with more than a dozen people associated with, or closely watching, the US carmaker, and many of them said losing almost three years on its proposed joint venture with M&M as a key cause for Ford India’s troubles along with the Covid-19 pandemic.

The time, effort and resources wasted on curating a joint plan could have been better utilised on creating its own product plan, especially engines. It has become a sticking point for future products as powertrains were set to come from Mahindra, they said.

“Exploring partnership with Mahindra was the biggest mistake that Ford committed in India in its over 20-year journey, and that too, not once but twice,” one person said. “Once bitten, they should have been shy the second time.”

Ford had entered into an alliance discussion with Mahindra in 2017 to explore partnership on sharing products, manufacturing plant and future technologies. The talks converted into a proposed joint venture in the second half of 2019 but was called off on December 31st 2020.

While the emerging market operating model (or EMOM) did help Ford India to break into profits in 2017-18 and FY19, amid falling volumes in both domestic and export markets and a shift in attention towards the Mahindra partnership, the US carmaker cleaned up its books and took an impairment charge of Rs 5,814 crore in FY20 to start afresh. The company is likely to take a similar impairment charge in FY-21.

However, it eroded the net worth of the company – the shareholder fund of Ford India slipped to negative Rs 597 crore in FY20 from Rs 4,858 crore in the previous year, according to its ROC filing. Its total asset at the end of March 2020 stood at Rs 11,173.36 crore, down 39% from a year earlier.

Ford India is not likely to invest in its new generation cars due to low volumes of Figo and Aspire, but has engaged with the vendors to work on an EcoSport upgrade and a Hyundai Creta-rivalling SUV – but the work on it has been put on hold, sources said.

But with falling overseas volumes, these products are not meeting the business case of 8% EBIT due to lack of scale. Hence, the US headquarters may not allocate new capital for them.

“North America is moving to EVs, the EcoSport for the US market is not needed beyond 2022. So, with less than 5,000 units a month of domestic volumes and falling demand for exports, how can one justify such large operations?” said a person familiar with the situation. “Hence tough decisions are likely to be taken.”

Ford India had in March informed the vendor fraternity to stall all the development work while the management is working vigorously to arrive at a business plan that aligns with the global roadmap.

The engine or powertrain assessment on these projects stalled the work on the projects. Earlier the powertrains were set to come from Mahindra

With 90% of the market being dominated by the top five carmakers and the uncertainty in the long-term growth prospects of the auto industry and economy amid the pandemic have resulted in serious challenges, including capacity utilisation.

Ford’s plant capacity utilisation has now fallen to 20% in the Indian market that promised a lot but delivered little on its potential. The Indian car market is sitting on a glut in capacity of over 50%.



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