Ford runs from Russia

Ford can leave only one production site in Russia, where light commercial vehicles will be assembled, or leave the country completely - without a special investment contract, auto production will be unprofitable.
27.03.2019
Forbes
Origin source
The American automaker Ford may leave Russia in the summer of 2019, where it currently assembles cars at three car factories. Final decisions on the restructuring of the Ford Sollers joint venture will be announced on March 27, the Kommersant newspaper reported on Tuesday, March 26.

Publications sources in the government and in the market said that the Ford Sollers JV, with the participation of the government, is already in talks with potential buyers of the company's assets.

The basic version of the restructuring of the joint venture involves, in June-July of this year, to stop the production of passenger cars in Russia and their import into the country. According to the newspaper, Ford plans to produce only light commercial vehicles (LCV) in Russia, for which it will retain a share in the plant in Elabuga, where the Ford Explorer SUV and the Ford Kuga crossover are currently produced. Venues in Vsevolozhsk and Naberezhnye Chelny will be closed or sold.

The press service of Ford confirmed that the company's shareholders "are at the stage of finalizing the decision" on the restructuring of the joint venture. The decision is planned to be announced soon, the press service of the company reported.

The fact that Ford could close factories in Vsevolozhsk and Naberezhnye Chelny was reported in early March by Reuters news agency citing sources in the automotive industry. They said that only LCV Ford Transit will be assembled in Elabuga. Two interlocutors of the agency pointed out that the business in Russia brings Ford significant losses.

But Ford can completely withdraw from Russia, since it does not show interest in signing a special investment contract (SPIC). All concerns should sign such a special investment contract until July 2019 in order to gain access to subsidies, without which production of cars in Russia is unprofitable. According to the publication, the Ford Sollers JV application for SPIK was ready in 2018, but then the work on it stopped. In the event that Ford completely abandons the production of passenger models, it is very difficult to revise the SPIC financial model in the remaining periods.

Thus, Ford could become the second American auto giant who decided to leave Russia. In the spring of 2015, General Motors did it.

In Russia, Ford builds a Ford Sollers joint venture created in 2011, in which Ford owns 50.1%, Sollers - 49.9% (in 2015, the Russian company gave the American automaker a package of preferred shares of the joint venture, at the same time concluded an option for which they could buy each other a package in a joint venture at the minimum valuation of $ 135 million). The joint venture manufactures, imports and sells all Ford products, including automobiles, parts and accessories. The joint venture includes three production sites: in Vsevolozhsk, with a capacity of 160,000 cars per year, which produces Ford Focus and Ford Mondeo sedans and station wagons, in Naberezhnye Chelny (110,000 cars per year, Ford Ecosport crossovers, hatchbacks and Ford Fiesta sedans ) and in Elabuga (capacity of 85,000 cars per year, Ford Explorer, Kuga, LCV Transit crossovers and engines are produced).

In 2018, Ford sold 53,234 cars in Russia, a year-on-year increase of 5.7%, with an overall market growth of 12.8%. Ford’s share in the Russian market is 3%. The revenue of Ford Sollers Holding LLC at the end of 2017 amounted to 67.1 billion rubles, the net loss decreased from 23.8 billion rubles to 13.6 billion rubles over the year.

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