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Ford Motor Co says it will close its three plants in Brazil this year and take pre-tax charges of about $4.1bn as the COVID-19 pandemic worsened the company’s under-utilisation of its manufacturing capacity.
Production will cease immediately at Ford’s plants in Camacari and Taubate, with some parts production continuing for a few months to support inventories for aftermarket sales. The Troller plant in Belo Horizonte, Brazil, will continue to operate until the fourth quarter of 2021.
Ford officials said the action was part of the $11bn global restructuring previously announced by the US automaker, of which it had accounted for $4.2bn through the third quarter of 2020. Ford shares closed more than 3 percent higher on Monday on Wall Street.
The plant closures affect about 5,000 employees, mostly in Brazil, Ford spokesman TR Reid said on a conference call with reporters.
Industry vehicle sales fell 26 percent in Brazil last year and are not expected to rebound to 2019 levels until 2023 with an emphasis on less profitable fleet sales, Ford said.
“We know these are very difficult, but necessary, actions to create a healthy and sustainable business,” Ford Chief Executive Jim Farley said in a statement. “We are moving to a lean, asset-light business model by ceasing production in Brazil.”
Ford officials said the plant closures are part of the company’s strategy to achieve 8 percent global operating margins. Ford, which has operated in Brazil for more than a century, has begun discussions with its unions and others about the layoffs.
Brazil’s economy ministry lamented Ford’s decision to end production in the country and said it reinforced the need for reforms to improve the business climate.
In Camacari, in northeastern Brazil, the union called an emergency meeting at the factory gates at the first shift on Tuesday to take a stance on the loss of 4,059 jobs.
“This very hard blow took us by surprise. We never imagined that Ford could close its factories in Brazil,” said union leader Julio Bonfim in a video message to the workers.
The latest plant closings come after Ford shut a heavy-duty truck factory in Brazil in 2019, taking a $460m charge. Ford will be left with one large factory in a region where founder Henry Ford established a presence early last century.
South America has been a persistent money loser for Ford for most of the last 16 years. The company reported pre-tax losses of $386m there in the first three quarters of last year. Ford will report its fourth quarter earnings on February 4.
The closures marked another retreat by Ford in a developing market after the Dearborn, Michigan-based company last month called off its car joint venture with India’s Mahindra and Mahindra Ltd.
As a result of the plant closures, Ford will end sales in South America of its EcoSport SUV, Ka subcompact car and T4 SUV once inventories are sold.
Ford retains a plant in Argentina and another in Uruguay.
Ford said it will maintain its product development centre in Bahia, its proving ground in Tatuí, Sao Paulo and its regional headquarters in Sao Paulo.
Of the $4.1bn in charges, Ford said it expects to record about $2.5bn in the fourth quarter of 2020 and about $1.6bn in 2021. The charges include about $1.6bn in non-cash charges and the rest in cash, primarily in 2021 to cover the layoffs.