Eyeing elusive profits as Ford looks to contain costs in India

fordy
fordy

After the exit of General Motors from India last year, is trouble now brewing at fellow American carmaker Ford? The company has decided to slow down hiring in India as well as do away with one of the two annual increments as it works towards aggressive cost-cutting measures to realise profits, which have remained elusive despite Ford spending more than 20 years in the country.

Ford is also understood to have halted plans to launch any independent all-new car till the year 2020, looking at introduction of products that would be jointly developed with Mahindra & Mahindra.

Also, to cut down on rental outgo, the company has shifted its corporate office in Gurgaon from the plush Cyber City area to a new, relativelysmaller location (in the same city) while also moving a large number of employees to Chennai, sources told TOI.

The company did not answer specific queries related to the developments, but did come out with a detailed statement enumerating the various steps it is undertaking. “The focus on driving competitive costs is important to ensure operational fitness. We are reducing material and structural costs to ensure we use our capital in areas that customers appreciate and value,” a spokesperson said.

A source said that many positions in key functional departments have not been filled after they fell vacant once someone resigned. “Each and every position is being evaluated thoroughly. There are positions in many departments which are vacant.” The spokesperson, however, said that hiring will be done at the engineering and technology centre in Chennai.

The increment, which has been dropped, used to be awarded every year in October towards inflation adjustment. “The management has decided to only award the increment which is given towards March,” the source said.

Ford said that in 2016, it reduced costs in India by 37%, and this was followed by a 9% reduction in 2017. “We have done this while growing volumes — in fact, this year we are growing faster than the passenger vehicle industry,” the spokesperson said.

Sales in the domestic market remained virtually flat for Ford last year, though it scored well in exports that helped the company realise $3.4 billion (Rs 22,393 crore) in revenues against $2.8 billion (Rs 19,385 crore) in 2016-17.

However, what is worrying company executives — according to sources — is the “not so satisfactory” performance in India, which is seen as the world’s most promising car market. India contributed only about 33% to the company’s overall revenues, chipping in with $1 billion while the rest ($2.1 billion) were realised from exports.The company’s India sales grew by 1% in 2017 at 87,588 units, while exports grew by a robust 15% at 1,75,196 units (1,51,638).

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