Ford to cut big commercial-trucks, Fiesta in South America
Ford Motor Co. plans this year to idle a plant in Brazil and exit the commercial heavy-truck business in South America as part of a global cost-cutting effort.
Ford CEO Jim Hackett and the executive team decided the commercial heavy-truck business would have cost too much money to maintain there with "no viable path to profitability," the automaker said Tuesday. The decision comes just more than a month after Ford announced plans to cut hourly and salaried positions in Europe, and possibly shutter plants there.
The automaker builds F-Series pickups, Cargo heavy trucks and the Ford Fiesta compact car at the Sao Bernardo Assembly Plant. The automaker is cutting sales of the Cargo lineup, which includes Transit vans; F-4000s; F-350s; and Fiesta cars in South America this year. It was unclear Tuesday if the Sao Bernardo plant would get new products in the future.
"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. "We know this action will have a major impact on our employees in Sao Bernardo and we will be working closely with all our stakeholders on the next steps."
Ford plans to build its SUV and pickup portfolio in South America to boost profitability. The automaker is phasing out Focus production in Argentina as well. The automaker is taking similar steps in North America as it phases out sedans in favor of more SUVs and pickups.
The decision to exit the South American heavy commercial-truck business is expected to cost Ford $460 million, most of which goes to separation and termination payments for Ford employees, dealers and suppliers there. The charge is part of the $11 billion total Ford expects to incur as a result of its global restructuring.
Ford announced in January it would cut less-profitable vehicles from its European lineup, cut the workforce and possible close plants to right-side the money-losing business there. Ford has lost hundreds of millions in Europe and South America in recent years despite strong profits in North America.
Under Hackett's direction, Ford is cutting $25.5 billion in global operating costs, slashing the global salaried workforce, and taking an $11 billion charge in doing so.
Jim Farley, Ford president of global markets, said in January that restructuring plans for Europe and South America will differ from whatever Ford decides to do in North America.
"The situation of South American or Europe is quite different," he said. "Those businesses, we see a really healthy business within them. So restructuring will be a piece of that. Over the next months and weeks, you’re going to hear more."
The commercial vehicle business saved Europe, according to Steven Armstrong, group vice president and president for Europe, Middle East and Africa. South America's fate is different.
Though Ford's heavy commercial vehicles will flee the South American market, the automaker could still have a commercial presence there. Ford announced in January an agreement to partner with Volkswagen AG on commercial vans and pickups outside of North America. A Ford-VW co-developed pickup could launch in South America, though it's not expected before 2022.
The automaker has also cut "salaried and administrative costs region-wide" by 20 percent in South America, according to a news release.