Ease of doing business for MSMEs: The estimated loss of revenue for some of the MSMEs in Tamil Nadu supplying Ford is projected to be between 20% and 40%, and Ford adds to the overall impact of the closure announced by the company from his Maraimalai Nagar (near Chennai), a senior official in the MSME division of the Tamil Nadu government told Financial Express Online about the anonymity.
On Wednesday, Rural Industry Minister TM Anbarasan at the Chennai City and Industrial Development Corporation (CIDCO) office chaired a meeting with MSMEs and major Ford suppliers at its Chennai plant to discuss the potential impact.
“There were about 75 large companies from Tier I regions and about 75 other small companies from Tier I and Tier II cities that supplied Ford directly or indirectly. According to informal information collected before the meeting with the minister, MSMEs employed around 8,000 people at both levels. They were asked about the estimated business impact of the loss of Ford orders, as well as the loss of jobs, “added the official.
While some of the companies said the impact would mean a drop of around 20 percent in sales, few others said the impact would be around 40 percent, the official said. Once data is collected from all MSMEs and other businesses in about two weeks, the state government will assess the overall impact to see what kind of support could be offered.
Ford announced earlier this month that it would “immediately” stop making vehicles for sale in India. Production of vehicles for export will cease at the Sanand (Gujarat) assembly plant by the fourth quarter of 2021 and in Chennai at the engine and vehicle assembly plants by the second quarter of 2022. This means that the EcoSport models, Figo and Aspire are now not made in India. About 4,000 employees at the Ford factory would be affected by the restructuring.
According to the Tamil Nadu government, Ford is considering a relocation package for factory workers in Tamil Nadu. During Wednesday’s review meeting, Anbarasan had said the company was seeking a liquidation package, the official added.
In early September the Federation of Automobile Dealers Associations (FADA) announced that around 170 Ford dealers have around 391 branches across India and have so far invested around Rs 2000 crore in setting up their dealerships Of automobiles. The investment is now at stake.
“While Ford India employs 4,000 people, car dealers employ around 40,000 people without evicting them from their places of origin and therefore receive continuous training and education. Ford dealers in India currently have around 1,000 vehicles valued at around Rs 150 million through inventory financing from accredited Indian banks. They also have demo vehicles which are 100. In addition, Ford India also named several dealerships up to five months ago. These merchants will suffer the greatest financial loss of their entire lives, ”the association said.
Vinkesh Gulati, a car dealership based in Allahabad and Faridabad, said that the average investment in a new dealership is 68 million rupees, while smaller establishments require 24 million rupees. “Rs 2 billion at stake is an average. According to the dealerships, investments in a new dealership averaged around Rs 68 billion and around Rs 24 billion in a smaller dealership. Virtually all traders are MSMEs and they now have concerns about the business impact, ”Gulati told Financial Express Online.
While the potential impact on MSMEs that work with Ford has not yet been fully determined, the benefit to other automakers’ dealers is also negligible already that Ford is closing its plants. “The benefit to other dealerships would be minimal as Ford did not have a large market share in India and sold around 3,000 vehicles throughout India. This would not be so important that all other dealerships could benefit from it, ”added Gulati, who is also president of FADA and heads United Automobiles.
Ford had announced, however, that it would continue to have a smaller supplier network as it continued to manufacture engines for export and “will work closely with other suppliers to ensure that the vehicle manufacturing process runs smoothly.”