Ford will pay around $200 million in cash to employees and providers who lose their jobs when the company shuts down three of its plants in Russia in June, the company stated.
The U.S. automaker is shutting down two assembly plants and one engine factory as it states the passenger vehicle market in Russia is no longer profitable.
One assembly plant will remain open and will concentrate on the production of Ford Transit light commercial vehicles. Ford’s Russian operations hire 3,700 people overall through its Ford Sollers joint venture.
“Significant employee separations are needed and will be delivered through voluntary programs to the fullest extent possible,” Ford stated on Wednesday.
Ford Sollers CEO Adil Shirinov referred the decision to shut down the plants “difficult” and added that they were “critical to making sure the long-term viability of the Ford Sollers business.”
Mikhail Sergeyev, the chairman of the union representing workers at the Vsevolozhsk plant close to St. Petersburg, informed the RBC news website that the union would look for redundancy payments of two annual salaries for every one of its members.
“This is our main requirement if the administration offers us nothing more interesting. On April 2, negotiations will begin,” Sergeyev stated.
The Russian passenger vehicle market has been under major pressure in recent years, with recovery slower than expected and a transition to consumers purchasing lower-priced cars, Ford said in its statement.
This resulted in underutilization of the Ford Sollers plants and inadequate returns on invested capital. At the same time, Ford Transit sales boosted and the vehicle got a 15 percent share of the Russian market.
The RBC news website mentioned the Association of European Businesses as saying sales of passenger cars in the country halved to 1.4 million between 2013 and 2016, and recovered to just 1.8 million in 2017.
The plant near St. Petersburg has been manufacturing the Ford Focus and Mondeo and the Naberezhnye Chelny factory in the Republic of Tatarstan the Fiesta and EcoSport.
“We believe our decision to focus on the Russian light commercial vehicle market will result in a stronger performing joint venture and allows us to benefit from future market growth in the segment,” stated Sollers CEO Vadim Shevtsov.