Ford Motor Co announced on Tuesday its decision to shut down its oldest factory in Brazil. This will result in Ford exiting from heavy commercial truck business in South America. This move will cost 2700 jobs, which will help Ford with its restructuring plan in an attempt to end losses globally. Previously Ford had said that the global reorganization would cause plant closures in Europe and impact thousands of jobs, resulting in $11 billion in charges.
Following the announcement on Tuesday, investors and analysts were expecting a similar reorganization in South America. Jim Hackett, Chief Executive at Ford, said that the investors would not have to wait too long for the reorganization plan in South America. Ford has slated the factory in Sao Bernardo do Campo for closure. It has been operating since 1967.
The factory closure signals that Ford is planning on focusing on the core of its car business. However, the job cuts have caused a major blow to the new administration of President Jair Bolsonaro, which is trying to fight the unemployment rate which is currently above 11 percent.
The latest cuts by Ford have caused investors to keep a close eye on the company’s allegiance with Volkswagen AG. The two companies have pledged to work together on different projects, which will also include combining forces in regions like South America. Ford shares went up by 3.4 percent in New York. The factory closure is a huge blow to the industrial outskirts in Brazil. The automotive industry put up roots and helped with industrial growth in Sao Paulo.
The Sao Bernardo Mayor complained angrily about the lack of warning or notice by Ford regarding the factory closure. The company had not discussed its plans for closing down the factory with the workers. The move to close the factory will directly affect 2800 families and indirectly affect 2000 families.
The spokesperson for Ford declined to give an exact figure on the number of jobs that will be cut but acknowledged that there would be a significant impact. The automaker will work with unions and affected employees on the next steps.
Lyle Watters, Ford South America President, said that the company remains committed to South America. Ford sales grew by ten percent between 2017 and 2018 in Brazil, which was behind by 15 percent of the post-recession increase for the automobile industry as a whole. It ranked fourth in the trucks business with sales coming to less than half of Volkswagen and Mercedes Benz.