Ford Counting on China - Analyst Blog

Ford Motor Co. (F) and its joint venture partner in China, Chongqing Changan Automobile, are in talks to export China-made Ford vehicles to emerging markets. On the other hand, the automaker is exploring possibilities to export U.S.-made vehicles to China. The second plan is a part of a multi-billion dollar commercial deal that will be sealed on Chinese President Hu Jintao's visit to the U.S.

Presently, Ford owns a 35% stake in Changan Ford Mazda, with Changan holding 50% and Mazda Motor the remaining 15%. It is reported that Ford and Mazda will each form a separate 50:50 JV with Chongqing Changan Automobile Co. However, representatives of the three companies have denied their plans to dissolve the JV. The JV manufactures Fiesta, Mondeo, Focus and X-MAX models.

Ford has been pursuing a major expansion plan in the emerging countries, including Argentina, Brazil, China, India and Thailand. Through the expansion plan, the automaker aims to tap the growing market potential in the countries, especially those in Asia. Since last year, Ford has invested $510 million in China and $500 million in India as part of its expansion plan.

Last year, Ford added 40 new dealerships in China as part of its expansion plan. Further, the automaker plans to add 66 new dealerships by the end of the year, raising its total dealerships to 340 in the country.

Ford's sales in China grew 40% in 2010 driven by higher sales of Focus compact and Fiesta subcompacts. Changan Ford sold 403,283 vehicles, an increase of 34% from last year. Meanwhile, Ford's commercial vehicle venture in China, Jiangling Motors Corp., reported an impressive 56% rise in sales to 178,999 units.

Ford's domestic rival, General Motors Corporation (GM), posted a 29% increase in sales in the country to 2.35 million vehicles. J.D. Power and Associates has predicted sales in China to grow by 10.5% for 2011.

Ford, a Zacks #3 Rank (Hold) stock, showed a $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.