December 23

Will FORD provide service to their customers in future?

As per discussion with some experts that have left FORD and were doing management jobs there, I got to know that FORD (US) has given healthy compensation to the owners of the showroom for the next 5 years so that they don't go into some other business and keep on running their service centers for the next 5 years at least.

The idea here is to have a smooth transition before and after exiting India but not troubling the existing customers. For 5 years, customers just need to visit service centers regularly like they did when showrooms were there. If they face any issues, they can still escalate it to Ford-India on Twitter or Ford-US on Twitter if they face any parts, service, or warranty issues.

Ford started facing issues from early 2018 when their plants were having high running costs but less demand in India and lesser exports too. Their plant in Gujarat had a capacity to make 4 lac cars per year whereas they were making only 80K cars per year. They planned a Joint Venture with Mahindra too but it didn't work out very well because of the hidden clauses by Ford. Second, FORD had to return some compensation to Government because it was a subsidized land. After JV with Mahindra, Ford could no longer use it as a subsidized land. 

Here is Mahindra's statement on the JV failure:

"Until April 2020, we hardly had any issues. They were tough negotiators, but that wasn’t a problem. After that, in my view they were following the letter and not the spirit of the agreement,” said a source. Apparently, Ford was being very cagey about Related-Party transactions. “Ford India would import a lot of components from the Ford universe. But they didn’t give us the pricing formula, which we needed to know for us to negotiate. The formula we worked out is that if the JV is doing anything with Ford, then Mahindra will negotiate, and if the JV is dealing with Mahindra, then Ford will negotiate. This way there would be an alignment of interest and not a conflict of interest. But for this to work, we needed to know the transaction prices with the Ford universe."

Now, Ford is planning to keep its presence in India by having some CBU Units and have some niche products before they re-enter with a better plan in place.

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