Ford to Overhaul Louisville Plant - Analyst Blog

Ford Motor Co. (F) has decided to turn its Louisville plant into the most flexible one, capable of producing small cars, sport utility vehicles (SUVs) and wagons from next year. The company will invest $600 million for retooling the plant and add more shifts and workers. The investment is financed in part by the $5.9 billion U.S. Department of Energy loans it received last year to produce more fuel-efficient vehicles.

Ford's attempt to overhaul the plant can only be compared with that of Toyota Motor Corp. (TM) and Honda Motor Co. (HMC), whose plants are capable of producing multiple models at the same time without affecting the work shifts.

Currently, the Louisville plant produces the midsize Ford Explorer SUV, utilizing 1,100 workers in one shift. After overhauling, the plant will begin operating two shifts and employ 2,900 workers.

The addition of 1,800 workers at the plant includes fresh recruitments and transfers from other Ford factories. The company expects to hire about 1,000 employees to either work in Louisville or fill vacancies created by relocation of employees to the Louisville facility.

Ford will manufacture next generation Escape compact SUV at the plant in 2011. The redesigned version of the Escape is based on the Kuga model sold in Europe. The new model is expected to be more fuel-efficient compared with the existing version that is manufactured in the Kansas City plant. According to auto research website Edmunds.com, the new Escape will get 23 miles per gallon (mpg) in the city and 28 mpg on the highway.

Meanwhile, other sources have revealed that the retooled Louisville plant will also produce Lincoln small SUV from June 2012 as well as new Focus compact car and Grand C-Max wagon, sold in Europe. However, the company has refused to comment on production of these vehicles.

Ford will receive $240 million as tax incentives from state and local governments in Kentucky over the next 10 years as a supportive measure to draw further investments and create employment opportunities in the state.

Ford, a Zacks #3 Rank (Hold) stock,showed an $1.04 billion rise in profit to $1.91 billion or 48 cents per share (before special items) in the third quarter of the year from $871 million or 26 cents per share (before special items) in the same quarter a year-ago. The profits surpassed the Zacks Consensus Estimate by 10 cents per share during the quarter.

The improvement in profit was fueled by the strength of Ford's new products, consistently improving its performance at Ford Credit as well as a recovery in the North American automotive market.

Total revenues slipped 4.3% to $29 billion, including revenues generated from Volvo cars in 2009. This compared with the Zacks Consensus Estimate of $28.16 billion. However, excluding revenues from Volvo, sales improved $1.7 billion or 5.6% from the third quarter of 2009.

 
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