A few weeks ago, the news came down hard, but not unexpected – Ford would close its manufacturing operation in Brazil. To add insult to injury, the news came in the year in which the Detroit, US-based manufacturer was supposed to celebrate its 100th anniversary in the land of samba, feijoada, and cachaca.
In 1921, Henry Ford started operations in Brazil, hoping to grow rubber trees and produce rubber tyres – an endeavor that was brought to an abrupt halt when trees died after about 17 years. Ford stayed nonetheless and started to operate out of rented facilities in Sao Paulo. Over the next 100 years the car company built new factories, closed others, designed, modified, and adapted different models for the Brazilian market.
With vehicle sales dropping more than 26% in Brazil in 2020, the COVID-19 pandemic of 2020 and 2021 certainly accelerated Ford’s departure from Brazil, but it also wasn’t the only factor. The decision to close manufacturing plants is part of a larger, global restructuring of the car maker. At a deeper level, it is also is related to complex and long-lasting challenges in Brazil’s business environment. As The Economist reported, Brazil’s bureaucracy unduly burdens the automotive industry, and workers’ comparatively low productivity added its own difficulties – a phenomenon that is often described as the “Brazil cost”.
Oh, and did I mention that packing up and leaving a country doesn’t come cheaply either? Ford estimates that the cost of withdrawing from Brazil will be between $4 – $5 billion US$…