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Is Ford Considering a JV With Mahindra & Mahindra in India?

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Ford Motor Company (F - Free Report) is likely to sign a joint venture deal with Mahindra & Mahindra, which will mark an end to Ford’s independent operations in India. According to sources familiar with the matter, this move is probably Ford’s failure to capture market in India despite having presence in the country for more than 20 years.

Global automakers had a tough time making inroads into India, a market dominated by Maruti Suzuki and Hyundai Motor Company. For instance, General Motors Company (GM - Free Report) scrapped a $1-billion investment in India in 2017 and decided against selling Chevrolet cars there. The market has been a sales decline for the last 10 months, prompting the industry to cut production and jobs.

By entering into a JV, Ford will be shifting from its decades-old strategy of running independent operations in India. Due to mounting pressure from shareholders to make profits, Ford has been restructuring its business on a global scale with a purpose to save $11 billion over the upcoming years.

As part of the JV, the U.S. car maker’s Indian unit will transfer most of its automotive assets and employees to the new entity. However, it will retain its engine plant in Sanand and its global business services division. Notably, Mahindra & Mahindra will own a 51% stake in the JV while Ford will have 49%. Meanwhile, Ford will obtain equal voting rights and board representation.

The JV with Mahindra and Mahindra will help the U.S. auto biggie develop avenues of strategic cooperation that would help it achieve commercial, manufacturing and business efficiencies. The deal will also let Ford share its financial burden. It will lead to more economical Ford cars in India as the company won’t have to pay royalty to its global parent and will also be able to recover some of the investments made in India. Meanwhile for Mahindra & Mahindra, the deal will allow it to sell Ford vehicles under its own brand in India. The deal will alos help the companies launch models at lower development cost.

Zacks Rank & Other Stocks to Consider

Ford currently carries a Zacks Rank #2 (Buy).

A couple of other top-ranked stocks in the Auto-Tires-Trucks sector are Lithia Motors (LAD - Free Report) and SPX Corp. (SPXC - Free Report) . While Lithia currently sports a Zacks Rank #1 (Strong Buy), SPX has a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lithia Motors has an expected earnings growth rate of 12.8% for 2019. The company’s shares have rallied 71% year to date.

SPX has an estimated earnings growth rate of 22.7% for the current year. Its shares have gained 45.6% year to date.

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