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Ford to Elevate Production of Expedition and Navigator in US

Zacks Equity Research
Lower production on key platforms affects Lear's (LEA) first-quarter 2019 revenues, partly offset by the addition of new business.

Ford Motor Company F reported that it will increase the production of sports utility vehicles (SUVs) in the United States, per Reuters. The production expansion will drive this automaker’s profits on the back of robust demand for spacious, comfortable, and big SUVs and pickups in the country. Additionally, the availability of low-priced gasoline contributed to consumers’ demand for large SUVs, even at premium prices.

The United States-based automaker invested $925 million to upgrade the product line for the manufacturing of new-generation Expedition and Lincoln Navigator SUVs at its hub in Louisville, KY. Beginning in July, the factory will increase the production of these models by 20%. This will mark the second production increase of 20% for these SUVs in a year.

Further, the company will shift 550 jobs to the Kentucky truck plant to manage increased production. The soon-to-be shifted employees currently work at the Louisville assembly hub to manufacture Ford Escape and Lincoln MKC.

Ford has been witnessing sequential growth in Expedition and Navigator sales. In 2018, Expedition eight-passenger SUV’s retail sales climbed 35% year over year while Navigator’s sales jumped 70%. Growing customer demand for Ford’s Expedition and Navigator SUVs encouraged it to increase the production, which is likely to drive earnings and improve its market share in the United States.

Further, consumers are paying premium prices to own Ford’s new-generation SUVs. Expedition’s average transaction price rose $11,700 year over year to $62,700. Last month, Navigator’s average price rose to $81,000 from $78,000 a year earlier.

High average transaction prices, and robust demand for SUVs and trucks are likely to drive Ford’s revenues in North America. Further, product launches, fitness initiatives and turnaround efforts are expected to drive profits across all regions in 2019.

A few other stocks in the auto space are Dana Incorporated DAN, Oshkosh Corporation OSK and General Motors Company GM. Long-term growth rates for Dana, Oshkosh and General Motors are 4.4%, 11.3% and 8.9%, respectively.

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