''Ford Sollers has been under greay pressure in the last years. This brought to underutilisation of production capacities and inadequate payback of investments''
Having closed factories in Russia, the company hopes to ‘‘create a more competitive and profitable business model’’
Ford Sollers announced the closure of two car assembly factories in Russia, one of which is in Naberezhnye Chelny. The engine assembly factory in Alabuga SEZ will also cease operations. The carmaker announced it is leaving the market of light vehicles and will focus on business in light commercial vehicles. As Realnoe Vremya was explained in the company, the Tatarstan enterprises employ about 1,000 workers, and a significant part of them will have to be laid off. Ford Sollers is at the moment considering how many people will go to work to a new structure. KAMAZ, which earlier claimed it was ready to hire the laid off workers from Ford Sollers JV, confirmed Realnoe Vremya its intentions and said about talks with the company's representatives.
Change of course
On 27 March, Ford Sollers made an official address it was leaving the market of light cars, ''which will allow creating a more competitive and profitable business model''. By summer 2019, the production of Ford passenger vehicles will completely stop, that's to say, the factories in Naberezhnye Chelny (Fiesta and EcoSport) and Vsevolozhsk (Focus and Mondeo) as well as an engine assembly factory in Alabuga SEZ will close. Only the production of a successful model of light commercial vehicles Ford Transit will remain in Russia.
As the company explains in the official press release, the joint venture of Ford Motor Company and Sollers PJSC (Ford Sollers JV) will be restructured, while the Russian company Sollers PJSC will become the majority shareholder (it will get 51%; before the restructuring, the American partner held the majority of shares). The new structure will start working on 1 July.
The fears that Ford Sollers could completely leave the Russian market started to appear since the beginning of the year. The mass media noted the American company's falling share in the European market and cited financial indicators and used them to presuppose that the company might leave Russia. According to Kartoteka.ru, incomes in Ford Sollers Holding LLC's reports have been at a loss since 2013: 45,4 million rubles of loss in 2013, 3,1bn rubles in 2014, 16,1bn in 2015, the biggest fall was a year later equal to 23,8bn rubles. The situation got a bit better in 2017 – the fall reduced by more than 10 billion.
The factories haven't worked to full capacity, Izvestiya writes. For instance, 12% of the Vsevolozhsk factory was loaded (15,000 cars with a capacity of 125,000 were made last year), the factory in Yelabuga with a capacity of 65,000 manufactured 18,000 Kuga and Explorer cars. The factory in Naberezhnye Chelny didn't even reach 5% of its capacities and made 5,400 cars instead of 115,000, the newspaper notes.
The company itself doesn't specify the data about production volumes but confirms it hasn't operated to full capacity: ''In 2018, the factories were loaded by less than 20% on average. The load of factories became one of the key topics that required a solution within strategic reconsideration,'' says coordinator on PR at Ford Sollers in Tatarstan Indira Salimgarayeva.
Vice-Premier Dmitry Kozak said about talks with Sollers to sign a special investment contract (SPIC) ''to make Ford Transit vehicles in the car manufacturing factory in Yelabuga and its further localisation in Russia'' on the day the company announced the closure of factories and added that SPIC could be signed in the following two months.
Workers will go to 'other car manufacturers'
At the Krasnoyarsk Economic Forum Kozak claimed the government has no issues with the closure of factories, as they are sure that ''other car manufacturers are ready to purchase these sites that are becoming empty''.
Previously, Deputy Director General of Sollers PJSC Zoya Kaika told to the mass media that they were having talks to sell two factories planned to close. But she didn't name the purchasers citing that an American company was holding the talks.
''We work with several sides that expressed their interest in the production sites, but there haven't been concluded any agreement,'' Salimgarayeva explains.
It seems that KAMAZ factory isn't among the interested sides: head of the enterprise's press service Oleg Afanasyev told Realnoe Vremya that the lorry manufacturing giant didn't plan to purchase assets from Ford Sollers. In answer to Realnoe Vremya's question about agreements on sell assets Alabuga SEZ replied they didn't comment on the resident's business.
The factories will have closed by the end of June. As Salimgarayeva specifies, about 3,700 employees are working at Ford Sollers at the moment, of which 850 are in the Naberezhnye Chelny factory, some 100 are in the engine making factory.
''As a result of the restructuring, we will have to significantly reduce the staff. Now it's hard to say how many people we will have to lay off and how many people will continue working in the new structure, now we're solving this problem,'' she goes on.
According to Salimgarayeva, the staff will be reduced within a voluntary redundancy programme with additional compensation payment but she didn't reveal any details of the programme: ''Terms of the programme for the employees will be announced inside the company later.''
KAMAZ from Chelny previously said about an intention to hire the laid off Ford Sollers employees. According to Afanasyev, at the moment they are holding talks with representatives of Ford Sollers JV, the details will be announced after they are completed. ''As we claimed previously, we are ready to offer all laid off workers of the joint venture a job at KAMAZ if they want and meet our requirements,'' he goes on. In answer to the question if the carmaker would be able to provide every employee with a job in this case, the interlocutor explained that the working schedule was defined by the situation in the market of lorries and the presence of orders from consumers.
''The decision on the number of working days and downtime next month is made in the last decade of this month. This refers to all workers. In any case, the days of downtime when people get additional days-off are paid as 2/3 of the salary, which allows the workers not to lose the salary. This social policy has proved its effectiveness, we don't lay off the staff, we don't close factories and as the major employer of the city that accounts for over 40% of all industry of the car making city conserves the stability in the city,'' Afanasyev said.
Credit for Ford at 40bn rubles
As for restructuring the debt – 39,5bn rubles borrowed from VEB to create the joint venture in 2011 – Director General and major owner of Ford Sollers Vadim Shvetsov told journalists about it on 2 April: ''I hope this ends in the next 1-1,5 months,'' he presupposed.
These days, head of Vneveconombank Igor Shuvalov also commented in this respect. He noted that the state corporation has a proposal on restructuring, while parameters of the deal might appear by the next meeting of the supervisory board.
Ford Sollers itself didn't comment on the terms they agreed on citing confidentiality.
''Ford and Sollers PJSC – with the participation of the Russian government and VEB partner bank – optimised the restructuring plan and costs linked with it. We don't reveal the financial performance of the joint venture but can say the company has been under great pressure in the last years. This brought to underutilisation of production capacities and inadequate payback of investments. As a consequence, the restructuring was needed,'' Indira Salimgarayeva says.