Ford Motor Company (F - Free Report) has announced that it will collaborate with Volkswagen AG to reduce expenses. The companies will team up for commercial vans and pickups, and explore electric and autonomous technological developments. The companies have confirmed that there will be no probable merger or equity stake transaction.
The partnership between these auto giants will start in 2022, with the sale of commercial vans and medium-sized pickup trucks. Ford will develop and manufacture medium-sized pickups for both companies. Moreover, Ford will produce larger commercial vans to cater to European customers while Volkswagen will develop its commercial vans at Ford’s hub in Turkey. Ford expects that jointly developing trucks and vans will add up to $500 million in yearly pre-tax profit, beginning from 2023.
In recent times, the automotive industry is experiencing numerous changes, owing to stringent emission regulation, extensive developments for electric and autonomous vehicle technologies, and a continuous consumer shifting trend toward pickup trucks and SUVs. These changes compelled automakers to heavily invest on such developments and line up their portfolio with products that customers prefer. Amid such challenging conditions, collaborating with peers seems to be a good plan.
Ford Motor Company Price and Consensus
Despite such a forward-looking collaboration, shares of Ford have plunged roughly 1.7% in a day’s trading on Jan 15. The dip in share price can be attributed to the lack of joint investment plans for electric vehicles and self-driving cars, per Bloomberg. Investors were looking for massive development program announcements, similar to General Motor Company’s announcement in the last year. Deals that can offer greater savings while developing vehicle technology, as well as combining forces in non-profitable markets, can cut costs for the companies.
Currently, Ford is struggling with challenging conditions across all major markets. In the United States, high tariff-related costs on raw materials imported from China are hurting its profit margins. Apart from the United States, the economic slowdown in China and struggling business in Europe are other regional headwinds for Ford.
Over the past three months, shares of Ford’s have gained 0.5% compared with the industry’s increase of 10.2%.
Zacks Rank & Stocks to Consider
Ford currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Bridgestone Corporation (BRDCY - Free Report) , Dana Incorporated (DAN - Free Report) and Magna International Inc. (MGA - Free Report) ), each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bridgestone has an expected long-term growth rate of 4.7%. Share price of the company has increased 1% in the past three months.
Dana has an expected long-term growth rate of 2.9%. Over the past month, shares of the company have gained 20.1%.
Magna has an expected long-term growth rate of 8.5%. Shares of the company have gained 2.5% in the past three months.
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