Ford Sollers to Make SUVs in Russia - Analyst Blog

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Ford Sollers, the 50/50 joint venture between Ford Motor Co. ( F ) and Russian automaker Sollers, plans to manufacture EcoSport sports utility vehicle (SUV) in Russia next year in order to meet the growing demand for SUVs in the country. The joint venture will produce the vehicle at one of their two plants in Tatarstan during the second half of 2014.

According to Ted Cannis, head of the Ford Sollers, manufacturing SUVs offer a big opportunity for the joint venture in the Russian market. So far, automakers in Russia import SUVs from abroad pushing up their prices. However, Ford Sollers plan to market the EcoSport at a lower price.

Recently, Ford Sollers broke ground on a $274 million powertrain plant, located in Elabuga in the Russian republic of Tatarstan. The plant, which is expected to employ 500 workers, will manufacture three different versions of the 1.6 liter Duratec engine from December 2015.

The plant will have a capacity of up to 105,000 engines per year, which may be expanded to 200,000 engines per year. At least 30% of Ford vehicles built in Russia is expected to be equipped with these engines.

Ford began selling cars in Russia from 2002. Its expansion plan in the country is perfectly in line with its strategy to expand global sales by 50% to 8 million vehicles by 2015, given the potential growth in Asia. Sollers is the leading automaker in Russia after AutoVAZ.

The joint venture between Ford and Sollers was formed in 2011. It already operates a vehicle assembly plant in Naberezhnye Chelny in Tatarstan and another in Vsevolozhsk near St. Petersburg. So far, the joint venture manufactures Focus, Mondeo, Galaxy, S-MAX, Transit, Kuga and Explorer vehicles in these plants.

Ford, a Zacks Rank #3 (Hold) stock, posted an increase of 4.1% in earnings to $1.6 billion and 5.1% in earnings per share to 41 cents in the first quarter of 2013, beating the Zacks Consensus Estimate by 3 cents. Revenues improved 10.5% to $35.8 billion, exceeding the Zacks Consensus Estimate of $32.8 billion.

The improvement in revenues and earnings was mainly attributable to Ford's strong performance in North America and Asia Pacific Africa. The company's results were disappointing in South America due to unfavorable exchange rate as well as in Europe due to the sluggish economy.

The company's cross-town rival General Motors Company ( GM ) reported a 28.0% fall in earnings to 67 cents per share in the first quarter of the year from 93 cents in the same quarter of 2012 (all excluding special items) due to lower earnings generated from the company's all geographic operations except Europe. Despite this, GM's earnings exceeded the Zacks Consensus Estimate by 11 cents per share.

Few stocks that are performing well in the broader industry include Federal-Mogul Corp. ( FDML ) and Tower International, Inc. ( TOWR ). They carry a Zacks Rank #1 (Strong Buy).

FORD MOTOR CO (F): Free Stock Analysis Report

FEDERAL MOGUL-A (FDML): Free Stock Analysis Report

GENERAL MOTORS (GM): Free Stock Analysis Report

TOWER INTL INC (TOWR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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