Tata Motors’ acquiring the Ford Motors facility at Sanand, Gujarat, is a win-win for both the companies. The extensive facilities with a capacity for production of 300,000 cars, should further strengthen the spread of Tata Motors rich facilities for auto manufacture.
Ford set up the facilities with lot of expectations over the rich incentives offered by the Gujarat government. Remember, these began with Tatas shifting the Nano car production facility from West Bengal. There was then the rush of investments by Suzuki Motors, Ford India, MG Motor India, Hero MotoCorp, Honda Motorcycles… Like Maharashtra and Tamil Nadu, Gujarat was rapidly evolving an auto manufacturing hub.
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Sanand plant to be acquired at a cost of around Rs 725 crore will unlock a manufacturing capacity of 300,000 units per year that could increase to 420,000. The deal includes entire land & buildings; vehicle manufacturing plant along with machinery and equipment; and transfer of all eligible employees of Ford’s vehicle manufacturing operations at Sanand. |
Car production increases
There is interest in fresh investments in the auto industry post-Covid pandemic. Passenger car production at Tata Motors has bounced back and there is need for adding capacity. Particularly impressive has been the record of Tata Motors in its electric vehicle Nexon. With Ford Motors EVs gaining popularity in the US, Tatas may also look at the possibility of accessing the technology from Ford.
There is, however, disappointment in Tamil Nadu over the facilities at Maraimalainagar not attracted by the Tatas. In the last couple of years Tatas have been making handsome investments in high-end electronics, solar power… in Tamil Nadu. The group did look at the Ford plant, but did not pursue. The reason is obvious: fear of the burden of a large workforce making huge demands for termination – settlement.
Recent agitation and major labour issue
Reports of recent agitation by the employees stopping work and blocking access should have proved a deterrent. The cost of absorbing large sections of an aged workforce is a weighty issue. In 1996 Ford heralded the era of large investments for auto production in Tamil Nadu. It came with great promise of building on highly attractive incentives. But its progress has not been easy, facing stiff competition from Maruti Suzuki and Hyundai.
The experience of the other American giant, General Motors was similar: they set up plants in Gujarat and Maharashtra. After hefty losses, GM also struggled to get out of India.
Indian laws and labour practices do not lend for these. No doubt the policies make it easy to start a business; but closing it is so cumbersome. Even while striving to attract investments through incentives and stressing on ease of doing business, government policies should also focus on the ease of quitting.
