Earlier this week, we learned that Ford (NYSE:F) was preparing to take a $350 million charge due to a shift in the Venezuelan bolivar, but it seems as though the South American nation isn’t the only country giving Ford a hard time on the currency front. A weak Russian ruble is also doing a number on Ford’s financial performance in the country, and as a result, the Dearborn, Michigan-based company is preparing to axe 950 jobs in the region.
Ford operates a facility as a joint venture with OAO Sollers outside of St. Petersburg. The plant will be cutting about 700 positions in June with the removal of a work shift, according to Ford spokesman John Gardiner, who spoke to Bloomberg. Another 250 temporary employees will be released at a Ford-Sollers plant in the Tatarstan region, Bloomberg reports.
“Ford Sollers remains absolutely committed to the Russian market and is confident it has the right product plan, people and assets to deliver long-term profitable growth,” Ford said in a statement. Workforce and production cuts were caused by “the rapid and significant depreciation of the ruble, falling industry sales and a consumer shift away” from compact models in favor of sport-utility vehicles, according to the news service.
The Russian annexation of the Crimean peninsula wasn’t a driving force behind the sluggish nature of the Russian auto market — it was struggling prior to the chain of events that drew international ire and attention. Car deliveries in the country fell 4 percent in the first two months of the year, after a 5.5 percent drop in 2013 to 2.78 million vehicles.
The last year has seen the Russian ruble lose about 13 percent against the American dollar, making it the second-worst performing major emerging-market currency in the quarter ended April 1. The currency decline even spurred Renault SA, which owns the Russian favorite Lada brand, to lift its prices 3 percent in both January and March.
The Ford-Sollers St. Petersburg plant produces the Focus compact and the midsize Mondeo sedan (known as the Fusion here in the U.S.) and will also stop production for more than four weeks, until single-shift operation begins at the paint shop and final assembly hall on June 9, Bloomberg quoted Gardiner as saying.
Ford said that its sales in Russia this year through February plummeted 21 percent to 10,556 vehicles. However, it plans to add the production of the EcoSport SUV at a third factory run by the Sollers venture later this year, hopefully engaging the market for compact crossovers.