MOSCOW -- Ford Motor's Russian joint venture, Ford Sollers, will close two assembly plants and an engine factory, exiting the country's passenger-car market to focus on light commercial vehicles.
The move is part of a restructuring that will see Sollers assume control of the venture, which is currently led by Ford, the company said in a statement.
Passenger-vehicle production will cease by the end of June 2019, with closure of two vehicle assembly plants – Naberezhnye Chelny and St. Petersburg – and an engine plant in Elabug, Ford said.
The St. Petersburg factory builds the Focus and Mondeo models and Naberezhnye Chelny makes the Fiesta small car and Ecosport crossover.
Ford's assembly plant in Elabug, which produces Transit light commercial vehicles, will remain open. The Transit remains the top-selling foreign van model in Russia, according to specialist research firm Autostat.
Ford said the closures would lead to "significant" job losses, without giving details. In a filing, Ford said it expects to take charges of as much as $500 million.
The closures are part of a broader restructuring of Ford’s European business in an attempt to streamline operations in a region that has been a drag on earnings for years. The company is closing a transmission factory in France and cutting staff in Germany and the UK.
Ford was the first international automaker to launch vehicle assembly in Russia, opening the St Petersburg plant in 2002. In 2011, it set up a joint venture with Sollers in which Ford and Sollers each hold a 50 percent stake, but Ford has controlled the business since buying up preferred shares.
Ford’s decision to scale back its local presence reflects on the dismal state of car sales in a market that, at the start of the decade, looked prime to become Europe’s largest. Vehicle sales have roughly halved since their 2012 peak, hit by economic weakness and a plunge in the value of the ruble.
Ford sold 53,234 vehicles in Russia last year, down from 130,809 cars in 2012, according to the Association of European Businesses lobby group. Industrywide sales of new cars in Russia are expected to rise 3.6 percent this year, marking a slowdown from last year, according to the group.
"The Russian passenger-vehicle market has been under significant pressure in recent years, with recovery slower than expected and a shift to lower priced passenger vehicle segments," Ford said.
Ford's move is the latest sign of foreign companies and investors souring on Russia, where an economic slowdown and western sanctions have dimmed the outlook for what many automakers long saw as a key growth market.
Foreign investment in Russia has plunged since President Vladimir Putin ordered the annexation of Crimea in 2014, triggering the first of several waves of U.S. and European sanctions. Shortly afterward, Ford wrote off its entire $329 million investment in its joint venture with Sollers. A year later, General Motors wound down its Russian operations.
"Ford once produced the most popular foreign car in Russia," said Andrei Toptun, chief analyst at Autostat, who estimates the company’s plants have been operating at about 25 percent of capacity. "Their market share never recovered from a decision to sharply raise prices in 2015."
Not all carmakers have written off Russia. France’s PSA Group is planning to reintroduce Opel vehicles this year after acquiring the brand from GM, assembling two models at its Kaluga plant southwest of Moscow. China’s Great Wall Motor plans to open a factory this year in Lipetsk.
Bloomberg contributed to this report
