We decided to stop producing in Brazil, but not leave the country, says Ford president for the region – 08/29/2021 – Market

Ford breaks the silence and, in the first interview with an executive after the closing of factories in Brazil, announced in January, speaks of the future.

Daniel Justo, who assumed the presidency of the company in South America in May, guarantees that the American automaker will continue with its business and even confirm launches. But a lot has changed.

The company’s current headquarters are located in the Vila Olímpia region, a neighborhood in the south of São Paulo. The neighborhood is also home to offices of premium brands such as Audi, BMW and Porsche. It’s a sign of the times: Ford is more elite, its cars don’t cost less than R$ 180 thousand.

While it continues in restructuring and negotiates its plants, the American automaker invests in the local development of global products. About 300 engineers were hired, and the testing ground in Tatuí (inner São Paulo) is still active.

“We are thinking much more about software than manufacturing itself. And if you take the 2,000 people we have in Brazil today, most are working on technology innovation and development,” says Justo.

How has Ford dealt with the dissatisfaction of consumers who fear losing money when selling their cars? I think it’s natural for vehicles to suffer some devaluation, due to the time of use or the portfolio renewal that all automakers do annually or every three or four years.

We are not seeing a devaluation of Ka or EcoSport, unlike what is happening with the market. We even saw Ka appreciating more than the market average.

The devaluation of the product can be closely linked with consumer distrust, if there will be services, if there will be availability of parts. And in these first six months of the year, we have a statistic that 99.7% of customers who go to our dealerships have their product fixed in less than 24 hours.

Maintaining this consistency of service quality and parts availability is a factor that should prevent any extraordinary devaluation.

Have the post-factory closure labor issues been resolved? We have already closed in full the labor agreements with the unions in Bahia, at the Camaçari plant, and in Taubaté, in São Paulo. Even the indemnities have already been paid.

We are preparing plants for asset sale. We announced the end of Troller production [no Ceará] for this fourth quarter and we are currently working with the union to close negotiations.

Troller is an interesting case, because Ford was emphatic in saying that it will sell the space, but not the brand. Does the company intend to use it in the future? We have great respect for the Troller brand, for consumers. First and foremost, we’re looking to make sure we continue to support our customers.

In terms of future plans, I am not going to speculate now on what we intend to do about this intellectual property. We are focused on trading assets at all plants, but we are not trading brands or intellectual property at any of the plants we closed.

Will Ford continue to manufacture parts, will it import them or will it transfer production to suppliers? It’s a mix of strategies. In some cases, we did what we call “all time buy”: we really estimated the demand for long periods, far beyond the legislation, and stocked it.

If I have a print [peça como porta e capô] which was made in Camaçari, today I have that mold with a supplier under a long-term contract. The warehouses are large, I would say there is a lot of stocked parts, but there is also a good strategy for consumers.

But there are many consumers who believe in Ford’s definitive departure from Brazil. We are not leaving Brazil. We decided to stop producing in Brazil, but we continue to produce in South America. Nothing better to demonstrate our presence than the entire line of products and services that we are bringing and will bring.

We have the [van] Transit, we are launching the entire manufacturing process in Uruguay, and Brazil is the largest consumer market for this product in the region. We announce the new generation of Ranger, which will be produced in Argentina, and Brazil is also the biggest consumer market for this plant.

There was also the Mustang Mach 1, the Bronco and we’re bringing the Maverick pickup [feita no México]. This reinforces the positioning that we are looking for, of being extremely strong in the pickup truck segment.

I think Maverick will have an audience very interested in the technology, the dimensions of the product and the way of driving. We’ve already done tests here and everyone was extremely impressed with the product’s capability.

Maverick arrives in 2022? First or second semester? Comes to 2022. We’re still working on timing. There are already more than 100,000 reservations in the United States. What we see with these new products is that the amount of pre-orders already accounts for a good amount of time for the plant’s initial production.

What are Ford’s expectations for the next five years? Besides Maverick, how many products will be released? I’m not going to tell you specifically about the number of products, but I’m going to tell you how we’re thinking about the business. We announced a restructuring and I think this was linked to looking to the future, looking to where the company should position itself in this market.

We are turning the key, ending a difficult restructuring, looking to the future and organizing the company.

We have pickup trucks and SUVs, where Ford is extremely strong globally. Here, in the Brazilian market, we have Ranger, Territory, Bronco. In the rest of South America we already have other products, such as the F-150 and Explorer. The company has global strength, and we have every intention of seeking to grow in these segments.

Another extremely important area is light commercial vehicles. We are Europe’s leader with Transit in light passenger and cargo transport. We have between 43% and 45% of this market in the United States.

Will Transit arrive in Brazil this year? Exactly. Through a partnership with Nordex, in Uruguay, we will start bringing Transit to Brazil at the end of this year. The idea is not just the product, the idea is to organize an entire business division around commercial vehicles.

The product is important, but this consumer wants efficiency for his business. You will see us working very hard on “uptime” [produtividade] to make sure the guy’s car doesn’t stop. The service package is extremely competitive.

And if you look at our portfolio in Brazil, one of our advantages today is connectivity. I think consumers still don’t have a complete picture of everything that connectivity can provide for both us, as a company, and for the consumer.

An example: a commercial customer with a connected Transit can have complete visibility into their vehicle’s productivity. On the other side, on the company side, we have information on more than 3,000 possible failure items to be able to anticipate and provide a service to the customer before the vehicle stops.

Will the company invest in hybrid and electric models in the domestic market? Yes. Ford has announced US$22 billion of investment through 2025 in this area, and we have a fantastic portfolio of global products to choose from and bring the best suited to the South American and Brazilian market. Obviously I won’t say which ones we’re releasing here, but we have a lot of options, both hybrids and electrics.

As important as the question of whether it is electrical or not is connectivity. We have our entire line connected here in Brazil, and we will extend this connectivity to the rest of South America until 2023.

Will Ford no longer invest in compact cars and sedans? As far as we can predict the future, the answer is no. This choice was already made back then and the results we are reaping only reinforce that we are in the right direction, globally and in our region.

Does the company intend to import the EcoSport, which was its biggest success in Brazil? No, we do not intend to import EcoSport to Brazil. We are importing some units to Argentina [a partir da Índia] for a very specific issue of a consortium contract that we have to fulfill. For Brazil, it is not the focus.

What is Ford doing to build customer loyalty? There is a consumer audience that is coming to the brand, but more suspicious. I think that today this is one of the issues that we talk about the most here. It is the opportunity that we have, with a more focused portfolio and a lower sales volume, to pay much more attention to these customers. Both those who are already with us and new customers.

Despite having closed a number of dealerships in Brazil, we took great care so that our geographic distribution was wide in the national territory.

How many stores were closed? Our coverage is around 200 municipalities in Brazil. The number of closed stores is around one hundred. But in the past there were several stores in the same city, so we took care that the coverage was maintained as best as possible.

We opened two new parts warehouses, one in Porto Feliz and one in Cajamar [cidades de São Paulo], with a wide distribution coverage. Connectivity has also provided an opportunity for us to be much closer to the consumer.

Through Ford Pass, today the customer journey can be fully digital. He can schedule a service, he can even opt for “pick up and delivery”, where someone picks up and returns your vehicle.

We are also looking a lot at how to approach different consumption models. The Ford Go, which we put on the market and are scaling now, is a good example of this.

If the consumer does not prefer to buy a vehicle, does not want to have all that work that comes with payment of property taxes, licensing and fines, we offer an alternative, a platform where the journey is digital and transparent for the customer.

There are also problems with semiconductors, and the expectation is that they will only be resolved next year, right? We are already seeing an improvement. If we look globally, the impact of semiconductors was very large in the second quarter of the year and still exists in the third quarter, and tends to decrease as some bottlenecks are resolved. But this difficulty will still drag on for some part of next year.

Is Ford studying producing a car in partnership with another automaker in Brazil? We currently have no plans. But, thinking strategically, I think there is a big transformation that the global auto industry is going to go through due to technologies, from the whole evolution of the combustion vehicle to the electric vehicle.

I think we will see a lot of investment in technologies, developments and partnerships for production. I can’t predict the future, but surely Ford has a big disruptor of vehicle technologies and products.

I see where the vehicles are going to depend a lot on the efficiencies where you can bring components in and produce to scale. But there is nothing specific for Brazil in the short term.

How do you see the current economic situation in Brazil? Do you still believe in alternatives like government aid to industry? I believe Brazil is an important global automotive market, and we believe it will continue to grow and develop. We expect the country to maintain an entire business structure based on stability, with a level of fiscal responsibility that results in controlled inflation and a controlled exchange rate.

When we look at the automotive sector, this transition from gasoline vehicles to electrified and connected vehicles, I think that Brazil, as a country, has to be able to leverage its manufacturing structure. I think the government’s participation, with guidelines and legislation, will be important.


X-ray

Daniel Justo, 43

President of Ford South America, he has been with the company since 1997. He was also CFO for the region, in addition to having worked in the US. Born in Santos, he has a degree in business administration from Universidade Mackenzie and an MBA in finance from Insper, both in São Paulo.