F Ford Motor Company

By Patrick Thomas and Mike Colias 

Ford Motor Co. said it will transfer most of its operations in India to Mahindra & Mahindra Ltd. as part of a joint venture with the Indian auto maker.

Mahindra, one of India's largest auto makers, will own 51% of the venture and Ford 49%. The companies value the venture at about $275 million.

Ford expects to book an $800 million to $900 million noncash charge related to the establishment of the joint venture in the third quarter, the company said in a regulatory filing Tuesday.

Ford said the joint venture will develop and build vehicles for Ford in India and serve as an export hub. Each company will continue to sell vehicles under their respective brands in India, where they have a combined 14% market share, the companies said.

The move will allow Ford to remain in a market that has growth potential but where it is difficult to make money because pricing pressure keeps profit margins thin. Ford said it will add scale by gaining access to Mahindra's Indian supply base and leveraging its expertise in low-cost engineering.

Ford Chief Executive Jim Hackett has been overhauling Ford's overseas operations, part of a broader plan to boost overall profitability by steering investment toward more-profitable parts of the auto maker's business, such as its North American truck portfolio.

In markets where Ford has struggled to turn a profit or build sizeable market share, it has reduced its presence or exited entirely. Last spring, Ford ended production and sales in Russia. The company also is in the midst of selling or closing several plants in Western Europe, narrowing its focus mostly to larger vehicles for commercial buyers.

The moves are similar to ones rival General Motors Co. has made over the past several years under Chief Executive Mary Barra. GM has left Russia and several Asian markets, and ended sales in India. It also sold its European business in 2017.

The Detroit car giants and their global rivals spent decades building out manufacturing footprints and sales forces across the globe to build economies of scale in a capital-intensive industry. But many have scaled back in recent years amid pressures to invest in burgeoning technologies like electric cars and in-vehicle connectivity.

Ford's said its decision to remain in India through the joint venture was based on growth expectations for the market and its strategic importance as an export hub.

"The creation of our joint venture today places India at the very center of Ford's strategy for international markets," Jim Farley, Ford's president of new business, technology and strategy, said at a press conference Tuesday.

Under Mr. Hackett's turnaround plan, Ford has been forging more partnerships to spread costs and access technology. This year, it forged an alliance with Volkswagen AG to co-develop commercial and electric vehicles and to partner on autonomous cars. Ford also is working on an electric vehicle with Rivian Automotive, a Detroit-area electric truck startup.

Ford said it will transfer most of its operations in India, including its personnel and assembly plants in Chennai and Sanand. The deal is expected to close by mid-2020, the companies said.

Ford said it will retain its engine plant operations in Sanand as well as the global business services unit, Ford Credit and Ford Smart Mobility.

The Dearborn, Mich., company said the joint venture is the next step in its alliance with Mahindra and said the venture is expected to be operational by mid-2020.

Ford and Mahindra agreed to a three-year partnership in 2017 to explore potential areas of collaboration on new technologies and retail sales.

Write to Patrick Thomas at Patrick.Thomas@wsj.com and Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

October 01, 2019 09:17 ET (13:17 GMT)

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