Picture: REUTERS
Picture: REUTERS

Sao Paulo/Detroit — Ford Motor Company said on Tuesday it will close its oldest factory in Brazil and exit its heavy commercial truck business in South America, a move that could cost more than 2,700 jobs as part of a restructuring meant to end losses around the world.

Ford previously said the global reorganisation, to impact thousands of jobs and possible plant closures in Europe, would result in $11bn in charges.

Following that announcement, analysts and investors had expected a similar restructuring in South America. Ford CEO Jim Hackett said in January that investors would not have to wait long for the South American reorganisation plan.

The factory slated for closure is in Sao Bernardo do Campo, an industrial suburb of Sao Paulo that has operated since 1967. It first produced a number of vehicles before being switched predominantly to trucks in 2001. It makes the F-4000 and F-350 trucks, as well as the Fiesta small car, a sales laggard.

The factory closure may mean Ford is refocusing on the core of its car business in Latin America­’s largest economy, based in a much newer factory in the northeastern state of Bahia. But the job cuts in Brazil’s industrial heartland represent a psychological blow for the new administration of President Jair Bolsonaro, which is battling an unemployment rate above 11%.

Ford’s latest cuts come as investors watch for signs of progress on the company’s alliance with Volkswagen, which already encompasses commercial vans and pickup trucks but may soon expand into electric and self-driving cars. The two companies have also pledged to work together on other projects, which could include combining capacity in regions  such as South America.

Ford shares closed up 3.4% at $8.83 in New York.

“You can’t cost-cut your way to prosperity in the long term,” said David Kudla, who heads Michigan-based Mainstay Capital Management, a firm that previously owned Ford stock. “We want to hear about the future, what you’re doing for mobility services and autonomous vehicles.”

The closure is also a blow to the industrial outskirts of Sao Paulo, where Brazil’s automotive industry was born and which long drove its industrial growth. It is also where imprisoned former president Luiz Inacio Lula da Silva came to fame as a union leader who organised huge strikes that helped end the military dictatorship.

The union in Sao Bernardo did not have an immediate comment. But Sao Bernardo mayor Orlando Morando complained angrily that Ford gave no warning and failed to discuss the closure with the workers.

“The 2,800 families directly affected and another 2,000 indirectly affected deserved a chance to react. This is an act of cowardice,” Morando’s office said.

A Ford spokesperson declined to provide a precise figure for job cuts but acknowledged there would be “a significant impact” and said the automaker would work with unions and other affected parties on next steps.

Ford South America president Lyle Watters said on Tuesday the company remains committed to South America, a region where it is not currently profitable.

Sales of Ford cars and light trucks grew 10% between 2017 and 2018 in Brazil, lagging a 15% post-recession increase for the industry as a whole.

In the trucks business, it ranked fourth, with sales less than half those of Mercedes Benz and Volkswagen.

Ford said in October it would stop building its Focus compact cars in Argentina in May 2019 as part of efforts to end its losses in the region.

Kleiton Da Silva, an employee and union representative in Ford’s surviving Bahia plant, said the carmaker was in talks to cut 650 of its workforce there, which the company has said totals 4,604.

The number two US carmaker expects to record pre-tax special charges of about $460m, with most of that recorded this year, it said .

Reuters