Ford to close factories, end manufacturing in Brazil

Ford Motor Company is ceasing manufacturing operations in Brazil after more than 100 years of building cars in the country as part of a restructuring that will eliminate 5,000 jobs and result in about a US$4.1 billion charge.

The automaker said Monday it will close two factories in Brazil immediately and a third by the end of the year, ending sales of three locally made models: the Ecosport, Ka and T4. The job losses are mostly in Brazil but also include workers in Argentina, it said.

"Ford Brazil will cease production at Camacari, Taubate and Troller plants during 2021, as the COVID-19 pandemic amplifies persistent industry idle capacity and slow sales that have resulted in years of significant losses," the company said in a statement.

The cuts are part of an US$11 billion global restructuring started under former Chief Executive Officer Jim Hackett and now continued by his successor, Jim Farley. The company will incur about US$2.5 billion in pretax charges for 2020 and another US$1.6 billion this year.

The latest plant closings come after Ford shut a heavy-duty truck factory in Brazil in 2019, taking a US$460-million charge. Ford will be left with one major factory in a region where founder Henry Ford established a presence early last century.

“We know these are very difficult, but necessary, actions to create a healthy and sustainable business,” Farley said in a statement.

The move is aimed at helping Ford achieve an eight percent pretax profit margin globally. South America has been a persistent money loser for most of the last 16 years. The company reported pretax losses of US$386 million there in the first three quarters of last year. Ford will report its fourth quarter earnings on February 4.

“The market simply doesn’t and isn’t going to support our current cost structure in the region,” T.R. Reid, a company spokesman, said in a media briefing today. “What we’re doing will help us create a sustainably profitable business in that part of the world.”

Ford rose as much as 3.3 percent on the news to the highest level in a month. The shares were were up three percent to US$9.27 at 3.24pm in New York.

Ford’s move to reduce its footprint in South America “makes sense,” after the automaker sustained average annual pretax losses of US$800 million in the region since 2014, Dan Levy, a Credit Suisse analyst, wrote in a note to investors.