Ford Motor said on Monday it will close all of its three plants in Brazil this year and take pretax charges of about $4.1 billion as the COVID-19 pandemic amplified the company's under use of its manufacturing capacity.

Industry vehicle sales fell by 26 percent in Brazil last year and are not expected to rebound to 2019 levels until 2023 with an emphasis on less profitable fleet sales, Ford said.

"With more than a century in South America and Brazil, we know these are very difficult, but necessary, actions to create a healthy and sustainable business," said Jim Farley, Ford president and CEO.

The news came as a bombshell in recession-hit Brazil, which is battling record unemployment. The plant closures affect about 5,000 employees, mostly in Brazil, Ford spokesman T.R. Reid said on a conference call with reporters.

The company said it would work with unions to develop an "equitable and balanced plan" to mitigate the impact of the closures on workers. 

"This very hard blow took us by surprise. We never imagined that Ford could close its factories in Brazil," said union leader Julio Bonfim in a video message to the workers.

Production will cease immediately at Ford's plants in Camaçari and Taubaté, with some parts production continuing for a few months to support inventories for aftermarket sales. The Troller plant in Horizonte, Brazil, will continue to operate until the fourth quarter.

The closures marked another retreat by Ford in a developing market after the Dearborn, Michigan-based company last month called off its auto joint venture with India's Mahindra and Mahindra.

Of the $4.1 billion in charges, Ford said it expects to record about $2.5 billion in the fourth quarter of 2020 and about $1.6 billion in 2021. The charges include about $1.6 billion in noncash charges and the rest in cash, primarily in 2021 to cover the layoffs.

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(With input from Reuters, AFP)