Ford to Open New Plant in China - Analyst Blog

A news agency in China revealed that Ford Motor Co. (F) will build a new plant in the Nanchang city of China's Jiangxi province in 2011. The facility will start operation in 2013.

Ford's plan to build the new plant in China is no doubt a part of its strategy to expand in the emerging countries, including Argentina, Brazil, China, India and Thailand. Through the plan, the automaker aims to tap the growing market potential in the countries, especially those in Asia.

Since 2009, Ford has invested $510 million in China and $500 million in India as a part of this plan. This year, Fordand Japan's Mazda Motor announced their plan to invest $800 million in their Auto Alliance joint venture in Rayong, Thailand. It will also introduce four models in Taiwan in the next 3 to 4 years.

In the first 10 months of the year, Ford's sales in the Asian-Pacific and African regions shot up 39% to 731,724 vehicles. Ford anticipates 70% of its sales growth to come from Asia Pacific and Africa region in the next 10 years, mostly from China and India. Industry sales in the region are expected to grow from 16 million units in 2009 to 35 million units by 2018. 

Recently, the automakerhas added 40 new dealerships in China in order to strengthen its foothold in fast-growing market. It further plans to add 66 new dealerships by the end of the year, raising its total dealerships to 340 in the country.

Apart from Ford, other automakers including its hometown rival General Motors Corp. (GM) have been expanding in China. GM operates a 50:50 joint venture (JV) in China with Shanghai Automotive Industry Corp. (“SAIC”). Recently, the JV announced plans to jointly develop small engine and transmission systems in China in order to capture the small cars market globally.

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 better 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.