Ford Motor Co.
) expects significant loss from South America in the second quarter
of 2014. The negative expectation of the automaker is due to low
sales volumes and change in the Venezuelan currency's exchange
In the first quarter of 2014, Ford's revenues from South America
declined 18% to $1.9 billion due to unfavorable foreign exchange,
volumes and mix, which offset net pricing gains. Pre-tax loss
increased to $510 million from $218 million in the first quarter of
2013 due to unfavorable currency exchange, higher costs and lower
In order to increase the access to U.S. dollars, the Venezuelan
government opened a new currency platform in March. However, last
month Ford's operations in Venezuela were hampered for the want of
foreign currency, required to import parts for assembly.
Ford's South American operation has been facing challenges since
2013 due to weakness in the industry, unfavorable exchange rates,
high inflation, capital controls, changing regional trade policies
and transition to global products in 2014. The automaker expects
further trouble down the road due to low GDP growth and weakening
industry together with increasing competition, excess capacity,
high inflation, lower foreign reserves, change in trade policies
and political and social uncertainty in some countries. As a result
Ford expects to record operating loss from South America in 2014.
However, Ford expects to benefit from the expansion of its product
lineup and enforcement of global ONE Ford offerings in South
America. This will lead to higher sales, increased pricing and
Ford's North American business will benefit from the launch of new
products which are high in demand. These new products ensure fuel
efficiency and enhanced quality. In this region, the automaker
focuses on delivering profitable growth with the launch of Ford
F-150, Mustang, Transit, and Lincoln MKC in 2014. Moreover, the
automaker expects industry demand to be high in North America and
margins to improve with new product launches and an efficient cost
Ford expects 2014 pre-tax profit from North America to be lower
than the 2013 level and operating margin to range from 8% to 9%.
Ford affirmed its pre-tax profit guidance, excluding special items,
in a range of $7 billion to $8 billion for 2014. Automotive revenue
is expected to be in line with 2013. However, automotive operating
margin and automotive operating-related cash flow are expected to
be lower than 2013.
In Europe, Ford is undertaking massive restructuring activities. As
a result, the company will be incurring restructuring and launch
costs. Overall, in 2014, Ford expects better pre-tax results than
2013 and anticipates profit in 2015.
In the new Middle East and Africa unit, Ford expects breakeven
results in 2014. In Asia-Pacific, Ford expects pre-tax profit to be
equal with the 2013 level.
Moreover, the automaker expects that Ford Credit's pre-tax profits
in 2014 will be in line with the 2013 level. Net interest expense
is expected to be about $700 million in 2014.
Ford currently carries a Zacks Rank #3 (Hold).
Fox Factory Holding Corp
Tower International, Inc.
) are better-ranked automobile stocks. Fox Factory and Gentherm
carry a Zacks Rank #1 (Strong Buy), while Tower International
carries a Zacks Rank #2 (Buy).
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