Sluggish demand in Europe has prompted
Ford Motor Co.
) to announce a 13 day pause in production at its Romanian unit
next month. The company has already closed the plant for one week
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Ford acquired Romanian automobile manufacturer Automobile Craiova
in 2008. The automaker started manufacturing the B-Max model at
the plant from last year. The company presently manufactures 370
cars and 1,000 engines every day in the plant.
About 2,500 employees of the plant will be adversely affected due
to Ford's decision to stop production. These workers, who
represent almost half of the Ford's Romanian employee base, will
be receiving 80% of their salary during this 13-day period.
Ford exports the vehicles produced in the plant to Germany,
Italy, Spain and France. However, most of the sales are made in
Britain. The automaker is optimistic about the macro environment
and expects that automobile sales will recover in Europe.
Ford's revenues from Europe rose 7.0% to $7.6 billion in the
second quarter of 2013 as wholesale volumes increased 8.9% to 391
thousand units. The increase in volumes was attributable to
non-repeat of dealer stock reductions incurred in 2012 and higher
market share, partially offset by lower industry volumes. Ford
had a narrower pre-tax loss of $348 million in the region in the
second quarter of 2013 compared with $404 million a year ago.
Thus, Ford expects fiscal year 2013 pre-tax loss of about $1.8
billion in the region, lower than the prior guidance of a loss of
$2 billion. However, the automaker recently shut down two
ancillary plants in the UK. Ford also plans to close the Genk
assembly line in Belgium by the end of next year.
On the other hand, owing to the rising demand for fuel efficient
vehicles, Ford announced that it is planning to invest C$700
million ($685 million) to modify the Oakville Assembly plant,
located at Ontario, Canada. The plant will focus on production of
Ford's Edge SUV, which is witnessing high demand as it provides
30 miles per gallon on highway. Other than Edge SUV, the plant
also produces Ford Flex, Lincoln MKX, and Lincoln MKT vehicles.
Ford expects higher demand for its vehicles going forward. This
modification of the plant will help the automaker in adjusting
the production volume of various cars according to the needs of
Ford currently has a Zacks Rank #2 (Buy). Other major automobile
stocks worth considering are
Nissan Motor Co. Ltd.
Tesla Motors, Inc.
). Volkswagen and Nissan carry a Zacks Rank #1 (Strong Buy),
while Tesla carries a Zacks Rank #2 (Buy).