Ford's Indonesian Dealers Demand Compensation After Abrupt Withdrawal

Tuesday, Jun 28, 2016

Ford Motor Co's dealers in Indonesia are demanding around $75 million in compensation after the U.S. carmaker announced in January it would close all operations in Southeast Asia's biggest economy.

The car market in Indonesia is dominated by Japan's Toyota Motor Corp and Honda Motor Co Ltd. Last year, General Motors Co shut its factory near Jakarta.

Six businesses which oversee 31 Ford dealerships in Indonesia said they have sent a second letter about possible legal action to Ford, Ford International Services and PT Ford Motor Indonesia.

In a joint statement on Monday, the dealers said they will take the Ford companies to a Jakarta court if there is no settlement. According to them, they account for 85 per cent of Ford's total sales in Indonesia.

Ford's decision came "out of the blue" for local dealers, which had made sizeable investments in showrooms and other facilities to support an expansion plan that Ford announced in 2011, Harry Ponto, their legal representative said.

"This is something that was done unilaterally and was unfair for the Indonesian partners. It's an action that is beneath an international brand like Ford," Ponto said. Ford's move could damage the confidence of Indonesian businesses in foreign investors, he added.

The automaker, which had less than one per cent market share in Indonesia, said in January it would exit all areas of business including sales and imports.

Ford said it was engaging with its dealers to implement its plan to exit Indonesia later this year, while ensuring that its customers continue to receive service, parts and warranty support.

READ ALSO: Ford to cease all operations in Japan, Indonesia this year

"Our decision to exit the Indonesia market came after pursuing every possible option," a company spokesman said in an email on Monday. "It became clear, however, that there would be no path to sustained profitability."

One of the Ford dealers, PT Kreasi Auto Kencana, invested more than 500 billion rupiah ($380 million) in buildings, equipment and manpower over the last few years. It now faces substantial losses. The contract it signed with Ford, which was renewable every two years, did not contain any clause governing what would happen if Ford were to leave Indonesia.


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