Ford Shuts Down Brazilian Manufacturing
Ford Motor Co announced on January 11, 2021, the closure of its three manufacturing plants in Brazil, citing the Covid-19 pandemic’s exacerbation of underutilized production capacity.
The decision, part of an $11 billion global restructuring plan, will result in pretax charges of approximately $4.1 billion, with $2.5 billion recorded in Q4 2020 and $1.6 billion in 2021, including $1.6 billion in non-cash charges and the remainder primarily for layoffs.
Immediate Impact and Layoffs
Production ceased immediately at the Camaçari and Taubaté plants, with limited parts production continuing for aftermarket inventories. The Troller plant in Belo Horizonte will operate until Q4 2021.
The closures affect around 5,000 employees, mostly in Brazil, with 4,059 jobs lost in Camaçari alone, prompting an emergency union meeting. Union leader Julio Bonfim called the decision a “very hard blow,” noting it was unexpected after Ford’s century-long presence in Brazil.
Economic Context and Strategic Shift
Brazil’s vehicle sales dropped 26% in 2020, with recovery to 2019 levels not expected until 2023, driven by less profitable fleet sales. Ford’s South American operations reported $386 million in pretax losses in the first three quarters of 2020. CEO Jim Farley emphasized the move toward a “lean, asset-light business model” to achieve 8% global operating margins, following a prior $460 million charge for closing a truck factory in 2019.
Regional and Market Implications
Ford will discontinue sales of the EcoSport SUV, Ka subcompact car, and T4 SUV in South America once inventories are depleted. The company will maintain its product development center in Bahia, proving ground in Tatuí, São Paulo, and regional headquarters in São Paulo, alongside plants in Argentina and Uruguay. Brazil’s Economy Ministry criticized the decision, calling for reforms to improve the business climate.
Broader Restructuring Efforts
The closures follow Ford’s cancellation of a joint venture with India’s Mahindra and Mahindra in December 2020, marking another retreat from developing markets. Ford shares rose over 3% on January 11, reflecting investor support for the restructuring, which J.P. Morgan analysts noted would reduce losses in South America, projecting a breakeven result for 2020 compared to a prior $300 million loss.
