Why Ford is closing down plants in Russia
Ford representatives have announced the closure of production in Russia. Information about this appeared in the media a few months ago, but the concern officially confirmed the information the other day. Ford is closing plants and now the enterprises are preparing to produce the latest models.
Cooperation between Ford Motor Company and Sollers began in 2011. Ford Sollers was created, which owns factories in different Russian cities. Three enterprises in the country produce the most popular models of cars: Focus, Mondeo, Explorer, Kuga and others. Engines for cars are delivered from the plant in Elabuga, which is located in the special economic zone “Alabuga”.
According to representatives of Ford Sollers, not all enterprises of the automobile concern are closed – there is one plant for production of cars. In addition, the production of engines is functioning without changes.
Despite the fact that the last cars manufactured in Russia will be presented on the domestic market by the end of autumn, the warranty and repair will be carried out by the official representatives of the company. Dealers will continue to sell and service Ford Transit models, as well as repair other cars of the corporation.
Ford Transit will not cease to be produced in Russia at the factory in Elabuga. Negotiations are currently underway between the car concern and the Sollers company to revise the terms of the partnership.
Closure of enterprises is part of a large-scale strategy of the manufacturer, aimed at reformation of loss-making offices in Europe and Russia.
As evidenced by Bloomberg agency, difficulties at Ford factories have been observed for some time. There are several reasons for this: introduction of new technologies for which capacities and personnel were not ready, changes in legislation in view of the increase in environmental protection measures, as well as fluctuations in the European market due to Brexit.
There are also internal problems in Russia. The domestic market has not met analysts’ expectations and shows less profit. Sanctions, fall of the national currency affected the living standards of Russians, and they began to choose budget cars. As a result, the industry was not loaded 100% and the yield of factories fell. In 2018, they were idle, which led to a strike by employees who were outraged by wage cuts.
Therefore, the management of Ford has decided to reduce production in order to accelerate the return on investment.
The corporation is losing its position not only in the Russian market, but also in the European one. Ford cars are ahead of Renault, Volkswagen, and Nissan in terms of sales volumes.
If earlier Ford Focus cars were popular in Russia, last year the demand for them fell by 4.6%. Total sales volumes in the first months of this year fell by 45%.