Ford to cease production in Brazil to reduce costs

Ford Motor Co. has decided to cease vehicle production in Brazil as part of a restructuring of its South America operations.

The automaker said Jan. 11 that it will immediately stop production at Camaçari and Taubaté plants in Brazil, with some parts production continuing for a few months to support inventories for aftermarket sales. The company will continue to operate the Troller plant in Horizonte until the fourth quarter.

"With more than a century in South America and Brazil, we know these are very difficult, but necessary, actions to create a healthy and sustainable business," Ford President and CEO Jim Farley said in a statement.

Ford expects the move to result in pre-tax special item charges of about $4.1 billion, including roughly $2.5 billion in 2020 and about $1.6 billion in 2021. The charges will include about $1.6 billion of noncash charges related to writing-off certain tax receivables and for accelerated depreciation and amortization. The remaining charges of about $2.5 billion will be paid in cash, primarily in 2021, and are attributable to separation, termination, settlement and other payments.

Ford said it would start working with stakeholders to mitigate the impacts of the production exit and "will continue to facilitate possible reasonable alternatives for interested parties to take over available production facilities."

Ford plans to continue vehicle sales in Brazil by sourcing vehicles from Argentina, Uruguay and other markets, the company said, adding that it will mantain its South America headquarters, product development center and proving grounds in Brazil.

The company said it is "actively" assessing its businesses around the world to achieve an 8% company adjusted EBIT margin and generate consistently strong adjusted free cash flow.

In December 2020, Ford agreed to terminate a planned joint venture with Mahindra & Mahindra Ltd. due to "fundamental changes in global economic and business conditions" partly caused by the coronavirus crisis.

The Michigan-based automaker also reported a decline in U.S. sales for both the fourth quarter and full year 2020.