As part of a comprehensive redesign of its global business, Ford Motor Company recently announced it will exit the commercial heavy truck business in South America.
As a result, the company will cease production at the São Bernardo do Campo plant in Brazil during 2019, ending sales of the Cargo lineup, F-4000, and F-350--along with the Fiesta small car--once inventories are sold.
“Ford is committed to the South American region by building a sustainable and profitable business with strengthened product offerings, outstanding customer experience, and a leaner more agile business model,” said Lyle Watters, president, Ford of South America.
The decision to exit the heavy commercial trucks business came after months of pursuing viable alternatives, including possible partnerships and a sale of the operation. The business would have required significant capital investments to meet market needs and increasing regulatory costs with no viable path to profitability.
“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. “Working closely with our dealers and suppliers, Ford will continue to provide support for our customers with warranty, parts and service.”
This decision follows other recent initiatives in the on-going redesign of the South American region including:
Reducing salaried and administrative costs region-wide by more than 20% over the past few months
Strengthening portfolio with SUVs and pickups that are growing in popularity with consumers while ceasing Focus production in Argentina
Leveraging global partnerships, such as the recently announced alliance with VW to develop mid-size pickup trucks
In connection with this announcement, the company expects to record pre-tax special item charges of about $460 million. The charges will include approximately $100 million of non-cash charges for accelerated depreciation and amortization. The remaining charges of about $360 million will be paid in cash and are primarily attributable to separation and termination payments for employees, dealers, and suppliers. Most of these pre-tax special item charges and cash outflows will be recorded in 2019 and are part of the $11 billion in EBIT charges with cash-related effects of $7 billion the company expects to take in the redesign of its global business.