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Mounting losses, confused strategy and bad timings—all that went wrong for Ford in India

Ford, whose losses in India have mounted to over $2 billion, has decided to shut down operations in India, which it says is a difficult market

September 12, 2021 / 03:55 PM IST
1999 Ford Ikon

1999 Ford Ikon

“Failure is simply the opportunity to begin again, this time more intelligently,” said Henry Ford. As the auto major he founded decides to shut shop in India, a look at Ford’s journey in this country reveals a series of missteps that pushed the auto major to the precipice.

On September 9, Ford Motor Company said it was "forced" to end manufacturing operations in India and close its two plants due to "huge accumulated losses and lack of growth in a difficult market".

Ford has accumulated more than $2 billion in losses over the past 10 years. When it arrived in India mid 1990s, the situation was tailor-made for the American giant. Maruti-Suzuki dominated the Indian roads and as the economy was opening up, aspirational Indians were looking for wider choices and a fitting challenger. Did Ford fill in that void? The answer is a firm no.

It wasn’t quick enough in the first place. This allowed the then little known South Korean company Hyundai to pip Ford to the post by going commercial first though both had decided to set up their first facility in Chennai in 1996.

Ignoring the ‘mass appeal’

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After an inordinate delay, Ford, to everybody’s surprise, ignored the entry-level segment, which dominated in terms of volume, and launched a mid-segment sedan. The first big mistake, which some say, eventually cost Ford the game.

When it was not fully utilising its capacity, it chose to expand into Gujarat, a move that showed a lack of strategy.

Ford India’s relationship management, too, didn’t help.  Hyundai had an Indian, BVR Subbu, at the top for 10 straight years. Maruti, too, had Indians piloting the company but Ford ran its India venture with foreigners at the top, which was would be a differentiator in a market that was price-and relationship-sensitive.

Also read: Why Ford is exiting India and what it means for customers

Squandering a head start

As both Hyundai and Ford announced their Chennai plants at the same time, a comparison is inevitable.

Of course, Ford had a head start as Hyundai inked the deal later. The Korean giant was an unknown entity for Indians. It picked Bollywood superstar Shah Rukh Khan as the brand ambassador to befriend Indian customers. Even today, his relationship with Hyundai continues.

Ford had enough confidence in its name and eschewed a high-profile endorsement. In hindsight, its confidence was misplaced.

Ford always laid store by a fully prepared entry but in the process, it got the timing wrong. Though it was first to sign a memorandum of understanding with the Tamil Nadu government, it went on stream much after Hyundai made a splash with its entry-level car Santro, the “tall boy’’ which re-defined India’s car scene.

By the time Ford came out with its entry-level sedan Ikon, Santro was the car India was talking about. Not just the Santro, Hyundai zoomed ahead with its entry-level sedan Accent, much before the launch of the Ikon.

The American auto major somehow ended up playing catch-up. What separated the two was perhaps the way the top honchos managed their entry into the Indian market. Relationship management was at the core in the early stages. Hyundai’s leadership in India was ever ready to reach out to all stakeholders and managed to create a positive image of the company, its products and its India focus.

The Ford leadership was perceived as distant and disconnected. Perhaps an overseas person as the leader of Ford India constrained its ability to connect with the Indian stakeholders effectively.

When the Ikon was about to be launched, the Ford India management chose to give the national press an audience but for some reason, the Chennai media was excluded. It reflected poorly on Ford India’s relationship handling. Proper management of stakeholders– people, environment, government and the like–is essential for the success of a venture.

Ford’s evolution in India ever since it launched the Made in India Ikon indicated an unsettled thought process. The Tamil Nadu plant was set up as a joint venture with Mahindra & Mahindra (M&M). It already had an alliance with the M&M to assemble its Escort vehicle at the Indian’s company’s plant in Maharashtra’s Nashik. That perhaps was the reason why Ford went in for a joint venture.

Hyundai, on other hand, chose to go solo. Ford surveyed several locations for its India plant. It set up shop in Chennai initially, thanks to the persuasiveness of Suresh Krishna, the father figure of the TVS family. It was Krishna who convinced the Mahindras, who were partners with Ford then, to come to Chennai, India’s auto hub. Over the years though, Ford took full control and went on to set up its second plant in Sanand in Gujarat.

The comeback that never was

Many summers after their separation, Mahindra Group and Ford Motor Company did return to the table yet again in September 2017 to explore a strategic alliance covering a gamut of areas—product, technology and distribution.

The plan was to collaborate and work together for up to three years. “Any further strategic cooperation between the two will be decided at the end of that period,” said a joint statement had said.

The MoU with the Mahindras signalled a significant shift in Ford’s India strategy. Former Chief Executive Officer Mark Field, it may be recalled, had put Ford’s business in India under review. The revival of the partnership with the Mahindras was viewed as a tweak in Ford’s India game plan.

In October 2019, M&M and Ford Motor Company signed an agreement to create a joint venture that would develop, market and distribute Ford brand vehicles in India, and Ford and Mahindra vehicles in high-growth emerging markets worldwide.

The JV was to see M&M hold a 51 percent controlling stake and Ford a 49 percent stake. Ford was to transfer its India operations to the JV, including its personnel and assembly plants in Chennai and Sanand.

Ford was to retain the Ford engine plant operations in Sanand and the Global Business Services unit, Ford Credit and Ford Smart Mobility.

But by the end of 2020, it became clear that the JV won’t take off and soon both sides announced that they were ending the discussions.

Once that JV plan was off the table, it was clear that Ford had to make a decision about its plants in India and that came on September 9.

Ford misread the Indian market with its focus on high-margin products. The company’s management also did not distinguish itself in communicating effectively and the developments in the global automobile sector brought matters to a head.

“It is your thinking that decides whether you're going to succeed or fail,” Henry Ford once said. The Ford India story is that of wrong thinking and consistent missteps.
KT Jagannathan is a senior journalist based in Chennai
first published: Sep 12, 2021 03:55 pm

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