Ford Motor Co has said that it will close its oldest factory in Brazil and exit its heavy commercial truck business in South America, a move that could cost more than 2,700 jobs as part of a restructuring meant to end losses around the world.
Ford previously said the global reorganization, to impact thousands of jobs and possible plant closures in Europe, would result in $11 billion in charges.
Following that announcement, analysts and investors had expected a similar restructuring in South America. Ford Chief Executive Jim Hackett said last month that investors would not have to wait long for the South American reorganization plan.
The factory slated for closure is in Sao Bernardo do Campo, an industrial suburb of Sao Paulo that has operated since 1967. It first produced a number of auto models before being switched predominantly to trucks in 2001. It makes the F-4000 and F-350 trucks, as well as the Fiesta small car, a sales laggard.
The factory closure may mean Ford is refocusing on the core of its car business in Latin America's largest economy, based in a much newer factory in the northeastern state of Bahia. But the job cuts in Brazil's industrial heartland represent a psychological blow for the new administration of far-right President Jair Bolsonaro, which is battling an unemployment rate above 11 percent.
Ford's latest cuts come as investors watch for signs of progress on the company's alliance with Volkswagen AG, which already encompasses commercial vans and pickup trucks but may soon expand into electric and self-driving cars. The two automakers have also pledged to work together on other projects, which could include combining capacity in regions like South America.
"You can’t cost-cut your way to prosperity in the long term," said David Kudla, who heads Michigan-based Mainstay Capital Management, a firm that previously owned Ford stock. "We want to hear about the future, what you’re doing for mobility services and autonomous vehicles."
The closure is also a blow to the industrial outskirts of Sao Paulo, where Brazil's automotive industry was born and which long drove its industrial growth. It is also where imprisoned former President Luiz Inacio Lula da Silva came to fame as a union leader who organised massive strikes that helped harken the end of the military dictatorship.
Representatives for the union in Sao Bernardo, as well as the local government, did not have an immediate comment.
SLOW GROWTH
Sales of Ford cars and light trucks grew by 10 percent between 2017 and 2018 in Brazil, lagging a 15 percent post-recession pickup for the industry as a whole.
In the trucks business, it ranked fourth, with sales less than half those of Mercedes Benz and Volkswagen.
Ford South America President Lyle Watters said on Tuesday the automaker remains "committed" to South America, a region where it is not currently profitable.
Ford said in October it would stop building Focus compact cars in Argentina in May 2019 as part of efforts to end its losses in the region.
“We know this action will have a major impact on our employees in São Bernardo and we will be working closely with all our stakeholders on the next steps,” Watters said in a statement, without providing further details about any severance benefits for laid-off workers.
Kleiton Da Silva, an employee and union representative in Ford's surviving Bahia plant, said the carmaker was in talks to cut 650 of its workforce there, which the automaker has said totals 4,604.
The No. 2 U.S. automaker expects to record pretax special charges of about $460 million, with most of that recorded this year, it said in the statement.
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