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Ford To Exit Russian Auto Market

Ford To Exit Russian Auto Market
United States automaker Ford Motor Co has decided to move out of the Russian market.
Ford is going to close down its joint venture in Russia - Ford Sollers, formed earlier with a domestic company, and the two assembly units of the company in the country would also be closed down as a consequence. The company would also close down an  engine factory in Russia in its strategy to exit the passenger car market of Russia.
Ford and its Russian partner said in a statement on Wednesday, this measure by Ford is a part of its global restructuring program and following its exit, the joint venture company would be completely taken over by its Russian joint venture partner Sollers. Currently, Ford has the majority stake in the joint venture.
There were reports last month in the media that Ford intended to exit the Russian market and close down its Russian production units as a part of its restructuring efforts in regions where the company was not profitable.
The closures would lead to "significant" job losses, the U.S. carmaker said but did not give any further details. On the other hand, Ford Sollers said in a statement that after the break up, the company would shift focus to serve the commercial vehicles market and the manufacturing of passenger vehicles would come to an end by the end of June this year.
"The new Ford Sollers structure supports Ford's global redesign strategy to expand our leadership in commercial vehicles and to grow the business in Europe in those market segments that offer better returns on invested capital," Steven Armstrong, president, Ford of Europe, said in the statement.
In 2002, Ford became the first foreign company to and a global car maker to set up an assembly unit in Russia with its first assembly unit being set up in St Petersburg. The joint venture with Sollers was set up in 2011 and both the company - Ford and Sollers, each owned 50 per cent of the joint venture company.  However since buying up preferred shares, the control of the company was taken over by Ford.
According to an estimate from the Association of European Businesses lobby group, there would be a slowdown in the growth in sale of new cars in Russia for the current year at an expected rate of 3.6 per cent which would be slower than the growth achieved last year.
"The Russian passenger vehicle market has been under significant pressure in recent years, with recovery slower than expected and a shift to lower-priced passenger vehicle segments," Ford said.
While claiming that the closure will lead to “significant” job losses, the No. 2 U.S. carmaker declined to give any further details. Ford has already made similar moves in South America and Europe as the company looks to shut down production operations in areas that are unprofitable for it.
Instead Ford is reported to be holding talks with Germany’s Volkswagen AG for a partnership to expand its commercial vehicle and pickup truck manufacturing and sale capacity.

Christopher J. Mitchell

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