Thanks to Stephen Armstrong, Ford can close down factories in Russia

The automaker is thinking about the closure of enterprises in the Leningrad region and Tatarstan.
06.03.2019
Forbes
Origin source
Ford may close plants in Vsevolozhsk (Leningrad Oblast) and Naberezhnye Chelny, Reuters reported, citing three sources in the automotive industry. The Focus and Mondeo cars are produced at the Vsevolozhsk plant, and the Fiesta and EcoSport are produced in Naberezhnye Chelny. The fact that the automaker is preparing to close the plant in Naberezhnye Chelny was confirmed to the agency by an official and an employee of the Russian automotive company.

Reuters sources point out that no final decision has been made to close the plants.

In Russia, the Ford car assembly is carried out by the Ford Sollers joint venture established in 2011. The joint venture is responsible for the production, as well as the import and sale of all Ford products (automobiles, parts, accessories). The joint venture includes three production sites - except for Vsevolozhsk and Naberezhnye Chelny, there is a plant in Yelabuga (Tatarstan). At the plant in Elabuga, where Transit, Kuga and Explorer models are now being assembled, only Transit will collect, says one Reuters source.

About the conditions on which Ford is going to stop production and settle relations with its partner, OJSC Sollers, the agency’s interlocutors do not know. A Ford representative in Russia said that the joint venture shareholders are discussing business restructuring as part of Ford’s new global strategy, a decision will be made in the second quarter of 2019. Back in January 2019, the head of Ford’s European division, Stephen Armstrong, said the company plans to cut thousands of jobs in Europe, including through the closure of enterprises.

In 2018, Ford sold 53234 cars in Russia (a growth of 5.7% over the year, with a total market growth of 12.8%), and its market share was 3%. The revenue of Ford Sollers Holding LLC at the end of 2017 amounted to 67.1 billion rubles, the net loss - 13.6 billion rubles (reduced from 23.8 billion rubles in 2016). Two Reuters sources pointed out that business in Russia is causing significant losses to Ford.

The joint venture Ford owns 50.1%, Sollers - 49.9% (as far back as 2015, the Russian company lost the package of preferred shares of the joint venture to the American automaker). At the same time, in 2015, the parties concluded an option, under which they could buy out a package in a joint venture with a minimum valuation of $ 135 million. Even when launched in 2011, the joint venture received a loan from VEB for 39 billion rubles. “Details of the restructuring of debt to VEB are discussed and disclose them prematurely. The size of the debt is not disclosed, "- told Reuters, the press service of VEB.RF

The CEO and main owner of Sollers, Vadim Shvetsov, in mid-February, in response to a question about a possible withdrawal of Sollers from the joint venture, said that his share in the joint venture was very minor. “My exit from the joint venture does not mean anything, because I have an effective share in the joint venture of 0.03%, at Sollers,” said Shvetsov at the forum in Sochi (quoted by Interfax). “I think that Ford’s business will change in Russia, because it is already clear in which segments Ford is uncompetitive. Now considered the latest stress analyzes. I think that in the coming month such work will be carried out. My personal opinion is that I cannot be responsible for Ford - that the Ford business will need to be transformed in Russia, ”Shvetsov said then. He noted that, as a minority shareholder in the project, if asked, he would recommend “cutting down passenger cars”.

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