Ford To Exit Commercial Heavy Truck Business In South America

Ford Motor Company (F) announced it will exit the commercial heavy truck business in South America. As a result, the company will cease production at the Sao Bernardo do Campo plant in Brazil during 2019, ending sales of the Cargo lineup, F-4000 and F-350 -- along with the Fiesta small car -- once inventories are sold.

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The decision to exit the heavy commercial trucks business came after months of pursuing viable alternatives, including possible partnerships and a sale of the operation. The business would have required significant capital investments to meet market needs and increasing regulatory costs with no viable path to profitability. This decision follows other recent initiatives in the ongoing redesign of the South American region including: Reducing salaried and administrative costs region-wide by more than 20 percent over the past few months; Strengthening portfolio with SUVs and pickups that are growing in popularity with consumers while ceasing Focus production in Argentina; Leveraging global partnerships, such as the recently announced alliance with VW to develop mid-size pickup trucks.

In connection with this announcement, the company expects to record pre-tax special item charges of about $460M. The charges will include approximately $100M of non-cash charges for accelerated depreciation and amortization. The remaining charges of about $360M will be paid in cash and are primarily attributable to separation and termination payments for employees, dealers, and suppliers. Most of these pre-tax special item charges and cash outflows will be recorded in 2019 and are part of the $11B in EBIT charges with cash-related effects of $7Bthe company expects to take in the redesign of its global business.

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