Ford to Move Midsize Sedan Production to China
- By Mayank Marwah
Ford Motor Company (NYSE:F), the second largest US automaker, has decided to move the production of its midsize sedans Fusion and Mondeo to China in the year 2020, as per sources. Currently, the company builds Fusion and Mondeo in Hermosillo, Mexico and Valencia, Spain. The company said that it would not ship those cars from China to North America and Europe.
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The intrinsic value of F
Bird"s-eye view of the case
Ford"s year-to-date sales in the US were down 1.3% as compared with the same period last year. Car sales dropped nearly 16% during January-November period as Fusion sales plunged 22%. On the other hand, SUVs and trucks witnessed 2.4% and 4.9% sales growth during the same period. These numbers speaks volumes about the shift in customer preferences from cars to larger vehicles and SUVs. No wonder why the company decided to shift Fusion production to China.
Source: www.goodcarbadcar.net
The company did not make any comment regarding the future of the plants in Mexico and Spain that used to build midsize sedans. However, the Michigan-based automaker announced last month that it would put in 750 million Euros in Valencia to manufacture a new generation of its Kuga sport utility vehicle. Also, the company would reposition the production of a new and refreshed battery vehicle to a plant in Mexico in 2020 so as to free up space for the production of self-driving vehicles in 2021.
Focus production would also move from Mexico to China in 2019. In this production shift, the company, popularly referred to as the Blue Oval, assured that no jobs in the US will be lost but a $900 million investment would take place in Kentucky truck plant in the US.
Focus on electric vehicles and autonomous technology
China, as of now, becomes the market of choice of numerous automakers that are looking to trim their manufacturing costs. As far as Ford is concerned, it is not only looking forward to trimming costs but also invest profoundly in electric and autonomous development, areas where the company has been left behind by other automakers. As a matter of fact, Ford plans to reduce its expenditure on traditional engines by $500 million and invest the same in electric and hybrid vehicle development.
Ford"s CEO Jim Hackett Chairman Bill Ford recently announced that the company would launch more than 50 fresh electric vehicles in China by 2025, eight of which would be new SUVs and at least 15 EVs from Ford and Lincoln.
Disclosure: I do not hold any position in the stock mentioned in this article.
This article first appeared on GuruFocus.
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