Ford's Indonesia dealers demand compensation after abrupt withdrawal

[June 27, 2016]  By Eveline Danubrata and Yuddy Cahya

JAKARTA (Reuters) - A group of Ford Motor Co's  biggest 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.

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

Ford did not provide immediate comment when contacted by Reuters.

The dealers, which said they accounted for 85 percent of Ford's total sales in Indonesia, will take the Ford companies to a Jakarta court if there is no settlement, Harry Ponto, the dealers' legal representative, told Reuters by phone.

Ford's decision to exit the archipelago 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, Ponto 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 said.

The automaker, which had a less than one percent market share in Indonesia, said it would exit all areas of business including sales and imports as it saw "no reasonable path to profitability" in the country.

An aerial view shows the Ford showroom in Jakarta, Indonesia, June 27, 2016. REUTERS/Beawiharta

Ford is not the only U.S. carmaker to struggle for market share in Indonesia, which is dominated by Japan's Toyota Motor Corp  and Honda Motor Co Ltd. Last year, General Motors Co shut its factory near Jakarta. (http://reut.rs/28XQvwS)

One of the Ford dealers, PT Kreasi Auto Kencana, invested more than 500 billion rupiah ($37.5 million) on buildings, equipment and manpower over the last few years, Nugroho Suharlim, Kreasi's operation and marketing division head, told Reuters by phone.

The company now faces substantial losses, Suharlim said, adding that 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 pull out of the country.

(Reporting by Eveline Danubrata and Yuddy Cahya; Editing by Christopher Cushing)

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