Ford to end manufacturing in Brazil, sees $4.1 billion in charges from South American restructuring

Assembly line of engines for the Ford KA Three cylinders on the Ford Engines plant in Camaçari, Brazil.

Paulo Fridman | Corbis News | Getty Images

Ford Motor is ending automobile manufacturing in Brazil beneath a restructuring of its South American operations. The actions, together with closing three vegetation, are anticipated to outcome in $4.1 billion in pretax charges, Ford stated Monday.

The automaker stated it’s going to document about $2.5 billion in money charges, primarily in 2021, for worker separation, termination, settlement and different funds. In addition, it’s going to submit about $1.6 billion in non-cash write-offs for tax receivables and accelerated depreciation and amortization. About $2.5 billion of the charges are anticipated to be recorded in 2020, in accordance to the corporate.

Shares of the automaker have been up greater than 3% in buying and selling Monday afternoon. The inventory is down about 1% over the previous 12 months, bringing its market worth to $36.2 billion.

Ford has operated in Brazil for greater than a century, nonetheless, the area and operations have been unstable in current years. The Detroit automaker misplaced $386 million in South America by the primary three quarters of 2020. It misplaced $704 million in the area in 2019. 

Ford CEO Jim Farley, in a press release, referred to as the restructuring “very difficult, but necessary, actions to create a healthy and sustainable business.”

Ford is actively evaluating and restructuring its world operations, together with these in South America, because it makes an attempt to execute an $11 billion turnaround plan that began beneath Farley’s predecessor, Jim Hackett, in 2018. Ford is hoping to increase profitability by attaining an 8% adjusted EBIT margin and generate constantly robust adjusted free money move.

Production will stop instantly at its Camacari and Taubate vegetation in Brazil, nonetheless, some components manufacturing will proceed for just a few months to help aftermarket gross sales inventories, Ford stated. Another plant in Horizonte, Brazil, will proceed to function till the fourth quarter. About 5,000 workers are anticipated to be impacted.

Ford stated it could instantly start working intently with its unions and different stakeholders to “develop an equitable and balanced plan to mitigate the impacts of ending production.”

Ford just isn’t exiting the market. It plans to proceed automobile gross sales in Brazil by sourcing automobiles from vegetation in Argentina, Uruguay and different markets, the corporate stated. It additionally will keep its South America headquarters, product improvement middle and proving grounds in Brazil.

“We are moving to a lean, asset-light business model by ceasing production in Brazil and serving customers with some of the best and most exciting vehicles in our global portfolio,” Farley stated.

As a part of the restructuring, Ford stated it expects to enhance related and electrified automobile choices in South America.

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