Ease of Doing Business for MSMEs: The estimated turnover loss for some of the MSMEs supplying to Ford is anticipated to be from 20 per cent to 40 per cent, nevertheless, the conclusive information is however to be gathered from all state MSMEs working with Ford to have an understanding of the all round effect of the plant closure, a senior official in the MSME division of the Government of Tamil Nadu told TheSpuzz Online on anonymity.
On Wednesday, at the City and Industrial Development Corporation (CIDCO) workplace in Chennai, Rural Industries minister TM Anbarasan had chaired a meeting with MSME and substantial suppliers of Ford in the state to the latter’s Chennai plant to go over the effect of its closure on their companies.
“There were about 75 large enterprises from Tier-I regions and another around 75 small businesses from Tier-I and Tier-II cities supplying directly or indirectly to Ford. Based on the informal information collected prior to the meeting with the minister, around 8,000 employees were employed with MSMEs in both tiers. They were asked about the estimated business impact from the loss of order to Ford and job losses as well,” the official added.
While some of the companies stated the impact would be about 20 per cent loss of turnover, handful of other people noted that the effect to be about 40 per cent, the official stated. According to him, as soon as the information from all MSMEs and other companies is collected in about two weeks, the state government will assess the all round effect to see what type of assistance could be provided.
Ford had earlier this month announced it will cease manufacturing autos for sale in India “immediately”. The manufacturing of autos for export will wind down at Sanand (Gujarat) assembly plant by Q4 2021, and Chennai engine and automobile assembly plants by Q2 2022. This suggests EcoSport, Figo, and Aspire models will not be manufactured now in India. The restructuring would impact about 4,000 Ford factory workers.
According to the Tamil Nadu government, Ford is searching at a resettlement package for Tamil Nadu factory workers. During the overview meeting on Wednesday, Anbarasan had stated that the firm is searching to have a settlement package, the official added.
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Earlier in September, the Federation of Automobile Dealers Association (FADA) had stated that about 170 Ford dealers have about 391 outlets across India and have invested about Rs 2,000 crore so far for setting up their dealerships. The investment is at stake now.
“While Ford India employs 4,000 people, dealerships employ around 40,000 people without displacing them from their home locations thus being continuously skilled and up-skilled all this while. Ford India Dealers currently hold around 1,000 vehicles which amount to around Rs 150 crore via inventory funding from reputed Indian banks. They also carry demo Vehicles which are 100s in numbers. Moreover, Ford India also appointed multiple dealers until five months back. Such dealers will be at the biggest financial loss in their entire life,” the association had stated.
Vinkesh Gulati, an automobile dealer based out of Allahabad and Faridabad stated the typical investment in a new dealership is Rs 6-8 crore whilst smaller sized outlets call for Rs 2-4 crore. “Rs 2,000 crore at stake is an average. According to the dealers, on average, investment in a new dealership is around Rs 6-8 crore and around Rs 2-4 crore in a smaller outlet. Practically all dealers are MSMEs who now have concerns around their business impact,” Gulati told TheSpuzz Online.
While the eventual effect on MSMEs working with Ford is however to be completely ascertained, the advantage to dealers of other automobile producers, as Ford shuts its plants, is also not substantial. “Benefit to other dealers would be minimal as Ford didn’t have a big market share in India, selling around 3,000 vehicles all India. This wouldn’t trickle down to such a big thing that any other dealer could benefit out of it,” added Gulati who is also the President of FADA and runs United Automobiles.
However, Ford had stated that it will nonetheless keep a smaller sized network of suppliers as it will continue engine manufacturing for exports and will “work closely with other suppliers to ensure a smooth wind-down of vehicle manufacturing.”