Brazil –  A Ford Motor South American Nightmare

Ken Zino of AutoInformed.com on Nationalizing Ford of Brazil

The growing Ford business crisis in Brazil stems from its attempts to shore up its balance sheet with its latest reorganization that ceases all manufacturing in Brazil.

Ford Motor management is standing at an intersection of survival and extinction in the international auto business. It’s attempting to eliminate losing operations in the face of a long heritage of local operations, customs and traditions that predate and overlook the globalization, disruption and perils that the company is facing. It’s a risky political challenge as well.

With the exception of North America and Europe, Ford’s automobile businesses lost money during Q4 and Full Year 2020 in every other major region – including China where the economy is thriving. Ford Motor earnings before interest and taxes (EBIT) are slight at 4.9% or when adjusted a paltry 2.2%.

In  money-losing South America there is a governmental history of graft and corruption, economic catastrophes and failed financial and fiscal policies – among other factors at play. The brew distilling there appears to be 151-proof toxic. The outcome is a potential drunk-driving multi-car collision that will leave smoldering businesses and tragically ruined lives and careers. This is all playing out against a backdrop of a new potent Corona virus variant in Brazil that infects vaccinated people, and an ongoing public health disaster. Deaths have surpassed 250,000 in Brazil. It is the world’s second-highest mortality tally after the U.S.

The growing Ford business crisis in Brazil stems from its attempts to shore up its balance sheet with its latest reorganization that ceases all manufacturing in Brazil, a country it has been operating for more than 100 years. Weak sales have resulted in years of significant losses, and a slow faltering retreat from the region. (see AutoInformed on Latest Ford Restructuring – Brazil Manufacturing to Cease, and Brazil to Nationalize Ford Motor Plants?) Ford Motor Company planned to stop production at its manufacturing sites in Brazil – Camaçari (BA), Taubaté (SP) and Troller’s plant in Horizonte (Ceará) – and at the Pacheco plant in Argentina, in response to the growing impact of the coronavirus in South America, that lowered consumer demand.

Ford maintains at the moment it will keep South America headquarters, a product development center and proving grounds in Brazil. Last March, Ford  “temporarily” stopped South American Production at its manufacturing sites in Brazil and at the Pacheco plant in Argentina, in response to the negative impact of the coronavirus in South America and Ford’s profitability. (See AutoInformed – Ford Motor Maxes Out Lines of Credit , Ford Q3 Net Income at $2.4B Treads Water. Q4 $500M Loss?, Ford Motor 2020 Loss $1.3 Billion. Microchip Shortage Looms)

According to Brazil’s Inter-Union Department of Socioeconomic Statistics and Studies, almost 124,000 direct and indirect jobs are at stake. The Taubaté metalworkers’ union (Sindmetau) signed an agreement with Ford during a conciliation hearing at the regional employment tribunal on 18 February of this year.

At that time it was agreed that talks would be held with the US carmaker’s global management team last week to try and prevent Ford from shutting down operations in Brazil. Under the agreement, jobs, wages and benefits of Taubaté workers will be maintained until the end of the negotiations, and production resumed on 22 February. Whatever happens, labor’s call for justice will continue as workers campaign to protect their jobs; they recently held a three-hour procession from the Ford plant in Taubaté.

Now comes the political pressure, not unlike that seen in other countries trying to protect high-paying manufacturing jobs.  A Brazilian Human Rights Committee met with representatives from the unions, the judiciary, parliament and other groups to look into the possibility of introducing a bill to nationalize the carmaker’s operations in Brazil. Their aim is to reverse the impact of the plant closures and de-industrialization in the country. Unions from around the world have sent letters of solidarity, calling for active industrial policies that –  in their words – put workers’ interests on the same level as those of company owners. Nothing more has occurred on this front so far.

What happened at the Ford global management meeting with the union is also unknown. Ford for its part issued what in public relations terms is a holding statement: “At the meeting with Metalworkers Union of Taubate, Ford reinforced that this decision is part of the global strategy to actively evaluate its businesses around the world, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8% company adjusted EBIT margin and generate consistently strong adjusted free cash flow. As result, we are moving to lean, asset-light business model to position Ford in South America to better compete with fast-approaching new technologies in connected services and electrification as consumer and regulatory demands reshape the market. The company knows these are very difficult but necessary actions and continues actively engaged in a negotiation process with the unions to develop an equitable and balanced plan to mitigate the impacts of ending production,” Roberta Madke of Ford Corporate Communications and Social Responsibility told AutoInformed.

Thus far despite requests for clarification, the unions are now silent. Other than what Autoinformed expects will be selective leaks, it’s not a bad public relations outcome if the negotiations occur in private. As to the workers and the society and the government? Well stay tuned. This is only the latest multi-front struggle in the ongoing restructuring of Automobility. There will be more at many other companies as the established orders are disrupted.

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