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Ford to Exit the Russian Market: What You Need to Know

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Mar. 27 2019, Published 2:33 p.m. ET

Ford Motor Company

Today, the second-largest American automaker, Ford Motor Company (F), announced a restructuring plan for the Russian market. In Russia, Ford operates through a joint venture with its partner Sollers PJSC. Let’s take a quick look at some of the key highlights of Ford’s new restructuring plans announced today.

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Ford’s restructuring efforts

Under the new restructuring plan, Ford will stop producing passenger vehicles (XLY) by the end of June 2019. The company will close three of its factories in Russia. Two of these three factories are Ford’s assembly plants located at Naberezhnye Chelny and St. Petersburg, and one is its engine plant in Elabuga.

By completely exiting its passenger vehicle business in Russia, Ford plans to focus only on its commercial vehicle business in efforts to improve its overall profitability. Note that small passenger cars yield a lower profit for automakers than large commercial vehicles.

Ford to lose control

To justify its move to exit Russian passenger car business, Ford, in a statement, said that the segment “has been under significant pressure in recent years, with recovery slower than expected and a shift to lower-priced passenger vehicle segments.”

Ford’s restructuring plans should allow its Russian partner Sollers PJSC to become a controlling shareholder in the Ford Sollers joint venture with a 51% controlling interest.

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