Sluggish demand in Europe has prompted Ford Motor Co. (F) to announce a 13 day pause in production at its Romanian unit next month. The company has already closed the plant for one week this month.
Ford acquired Romanian automobile manufacturer Automobile Craiova in 2008. The automaker started manufacturing the B-Max model at the plant from last year. The company presently manufactures 370 cars and 1,000 engines every day in the plant.
About 2,500 employees of the plant will be adversely affected due to Ford’s decision to stop production. These workers, who represent almost half of the Ford’s Romanian employee base, will be receiving 80% of their salary during this 13-day period.
Ford exports the vehicles produced in the plant to Germany, Italy, Spain and France. However, most of the sales are made in Britain. The automaker is optimistic about the macro environment and expects that automobile sales will recover in Europe.
Ford’s revenues from Europe rose 7.0% to $7.6 billion in the second quarter of 2013 as wholesale volumes increased 8.9% to 391 thousand units. The increase in volumes was attributable to non-repeat of dealer stock reductions incurred in 2012 and higher market share, partially offset by lower industry volumes. Ford had a narrower pre-tax loss of $348 million in the region in the second quarter of 2013 compared with $404 million a year ago.
Thus, Ford expects fiscal year 2013 pre-tax loss of about $1.8 billion in the region, lower than the prior guidance of a loss of $2 billion. However, the automaker recently shut down two ancillary plants in the UK. Ford also plans to close the Genk assembly line in Belgium by the end of next year.
On the other hand, owing to the rising demand for fuel efficient vehicles, Ford announced that it is planning to invest C$700 million ($685 million) to modify the Oakville Assembly plant, located at Ontario, Canada. The plant will focus on production of Ford’s Edge SUV, which is witnessing high demand as it provides 30 miles per gallon on highway. Other than Edge SUV, the plant also produces Ford Flex, Lincoln MKX, and Lincoln MKT vehicles.
Ford expects higher demand for its vehicles going forward. This modification of the plant will help the automaker in adjusting the production volume of various cars according to the needs of consumers.
Ford currently has a Zacks Rank #2 (Buy). Other major automobile stocks worth considering are Nissan Motor Co. Ltd. (NSANY), Volkswagen AG (VLKAY) and Tesla Motors, Inc. (TSLA). Volkswagen and Nissan carry a Zacks Rank #1 (Strong Buy), while Tesla carries a Zacks Rank #2 (Buy).
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