coming of words
continues its turnaround plan under new CEO Jim Farley. Latest: Shutdown of vehicle production in India.
Restructuring operations always result in charges against income. Investors, very likely, don’t care so much about the allegations as they do about the progress the new management is making toward improving profit margins over the long term.
The company on Thursday announced that while it is ceasing vehicle production in India, it is not going out of the country entirely. Ford (ticker: F) will focus on engineering, technology and business operations functions in the country.
Ford manufactures the Figo, Aspire, Freestyle, EcoSport and Endeavor in India.
Ford shares were down about 0.8% in premarket trading.
Dow Jones Industrial Average
Futures both fell around 0.2%.
This move should not come as a surprise. “We are continuing to assess our business in India, and we’ll have more to say later this year,” Chief Financial Officer John Lawler said at the end of the July second quarter earnings conference call.
In addition, Ford has said that it has lost about $2 billion in India over the past 10 years.
“The restructuring is expected to become a sustainably profitable business in India,” the company’s press release on Thursday said.
Ford is also working to improve profit margins around the world under former CEO Jim Hackett as well as Farley. Ford is looking to achieve operating profit margins of up to double digits and approximately 6%, respectively, in its key reporting segments in North America and Europe. In the first half of 2021, Ford’s North American operating profit margin was about 8%. Europe posted a small loss. All of Ford’s operations have been affected by global semiconductor shortages disrupting auto production.
The Indian move will result in a $2 billion restructuring fee with $600 million in 2021. About $300 million of that amount would be a non-cash asset write-down, with the remainder being paid in cash over several years. About 4,000 workers will be affected.
Ford expects to generate free cash flow of approximately $2.2 billion in 2021 and free cash flow of $4.8 billion in 2022.
Ford’s stock is up about 48% to date. Shares have risen as the company works to get out of the pandemic-induced slowdown by ramping up operations, improving profit margins and accelerating demand for cars.
Write to Al Root at firstname.lastname@example.org