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Ford to Shift Small Car Production to Mexico to Cut Costs

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On its investor day, Ford Motor Co. (F - Free Report) announced its decision to gradually shift the company’s small car production from the U.S. to Mexico. The move is being made to take advantage of lower costs in the country and in turn boost profitability. 

Further, chief executive officer, Mark Fields revealed the company’s plans to move a majority of the production of its small cars to other low-cost countries around the world by 2019. Earlier in the year, Ford decided to invest $1.6 billion to build a new small car production facility in Mexico, creating 2,600 direct additional jobs by 2020. The facility is expected to begin rolling out cars from 2018.

Previously, the company had confirmed its plans to shift the production of its Focus and C-Max models from its Wayne, MI plant to Mexico. Further, the company intends to introduce two new models that will be produced at this facility from 2018.  

The shares of Ford fell 1.9% to close at $12.14 on Sep 14.

Ford’s adjusted earnings per share in the second quarter of 2016 declined 3.7% from the year-ago quarter to 52 cents. Pre-tax earnings in the quarter also fell 8.8% year over year to $3 billion. However, the company’s revenues increased 5.9% in the quarter to $39.5 billion, with higher revenues recorded in the automotive segment. While earnings missed the Zacks Consensus Estimate, revenues beat the same.

Ford expects losses from South America to increase in 2016 from a loss of $832 million incurred in 2015. However, in Europe, the company expects higher profits compared with $259 million earned in 2015. In the Middle East and Africa, it anticipates profits to be in line or higher than $31 million recorded in 2015, while the pre-tax profit from Asia-Pacific is estimated to be higher than the year-ago figure of $765 million.

Ford currently holds a Zacks Rank #5 (Strong Sell). 

Some better-ranked companies in the auto space include Tata Motors Limited (TTM - Free Report) , Douglas Dynamics, Inc. (PLOW - Free Report) and Standard Motor Products Inc. (SMP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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