Ford (F) To Shift Production Facility Of Focus Cars To China

Ford Motor Company (NYSE:F) has announced to shift the production facility of its Focus small car model to China. This news was released in Financial Times. The manufactured models will be imported to the U.S. from mid-2019.

This step has been taken by Ford with an aim to trim the tooling costs up to $500 million, taking advantage of low oil prices and the stable U.S.-China trade relations despite recent tensions.

In recent years, sale of small passenger cars like Focus has witnessed a downtrend due to low petrol prices and an improved fuel economy of sport utility vehicles. This puts pressure on the automakers to produce passenger cars as cheaply as possible.

Per the company, Focus US sales weakened 20% in the first five months of 2017 compared with the year-ago period. However for the same period, Ford’s pick-up trucks saw an 8.5% swell in their sales.

Currently, the Focus model for the North American market is being manufactured at its Michigan plant and will continue with it through mid-2018. After that, the plant will be producing more profitable pick-up trucks and SUV models. So, the new decision will not impact the U.S. workers.

This marks the third change of plan for Focus models production. Last year, after repeated criticisms from the U.S. President Donald Trump, the company had decided to scrap its plan to set up a $1.6 billion manufacturing plant in Mexico for production of Focus cars and shift the new manufacturing facility to the southern U.S. borders, thus saving up to $500 million. However, it canceled its plans later and opted to produce the cars at an older Mexican plant.

Ford is expanding its production capacity in many emerging markets to facilitate supply and shrink costs. Recently, the company decided to invest $900 million in a truck factory in Kentucky, a part of the planned $1.2 billion venture in three of its manufacturing facilities in Michigan, announced in Mar 2017.

In May 2017, the company had announced an investment of about $350 million to upgrade its Livonia transmission plant in Michigan for expansion of its powertrain lineups.

Price Performance

Ford shares have underperformed the Zacks categorized Auto Manufacturers-Domestic industry in the last three months. The company’s shares have lowered 5.5% compared with the industry’s 8.8% advance.

Zacks Rank & Key Picks

Ford currently carries a Zacks Rank #3 (Hold).

Ford Motor Company Price and Consensus

Ford Motor Company Price and Consensus | Ford Motor Company Quote

Better-ranked companies in the auto space are Allison Transmission Holdings Inc. (NYSE:ALSN) , Ferrari N.V. (NYSE:RACE) and Dana Incorporated (NYSE:DAN) . Allison Transmission and Ferrari sport a Zacks Rank #1 (Strong Buy), while Dana carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has an expected long-term growth rate of 11%.

Ferrari has an expected long-term growth rate of 14.1%.

Dana has expected an long-term growth rate of 3%.

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