This article was originally published by Radio Free Europe/Radio Liberty and is reprinted with permission.
Ford has announced that its joint venture in Russia, Ford Sollers, is closing two assembly plants and an engine plant — a move that it said would lead to “significant” job losses in St. Petersburg and Russia’s Republic of Tatarstan.
In a March 27 statement from its European headquarters in Cologne, Germany, Ford said it will end its production of all passenger vehicles in Russia by the end of June.
It said the decision was made because “the Russian passenger vehicle market has been under significant pressure in recent years,” leading to “inadequate returns” on Ford’s investments in Russia.
It said “underutilized” passenger vehicle assembly plants would be closed in St. Petersburg and the city of Naberezhnye Chelny in Tatarstan, as well as an engine plant in the town of Yelabuga, also located in Tatarstan.
“Significant employee separations are required and will be delivered through voluntary programs to the fullest extent possible,” the statement said, without giving details about the number of expected job losses.
Ford Sollers employs around 3,700 people in total in Russia, Ford said.
The statement said Ford expects to make about $200 million in cash payments for the “separation and termination” of employees and suppliers.
The closures are part of a broader restructuring of Ford’s European business aimed at streamlining operations in a region that has brought down the company’s earnings for years.
Ford is also closing a transmission factory in Bordeaux, France, and cutting its staff in Germany and Britain.
Ford will now focus exclusively on commercial Transit vans in Russia through Ford Sollers. Russian partner Sollers will take 51 percent majority ownership of the joint venture, which was previously equally owned by both parties.
Ford of Europe President Steven Armstrong said the commercial vehicle business in Russia offers “better returns on invested capital.”
“While the actions we are announcing today are difficult, they are critical to ensure the long-term viability of the Ford Sollers business,” Ford Sollers CEO Adil Shirinov said.
Ford Sollers said it would continue to meet its warranty and service obligations for “existing and future owners of all Ford branded vehicles purchased in Russia.”