Investments will cover the states of Chihuahua and Guanajuato, but currency fluctuations and economic instability raises concerns
Ford Motor Company (NYSE:F) has announced a $2.5 billion investment in Mexico, taking advantage of the country’s ‘now booming’ auto market. The Dearborn, Michigan-based automaker will make an official announcement to in coming days ahead of the company’s 90th anniversary of its operations in Mexico. It is expected to create around 4000 jobs in the construction phase, and employing hundreds thereafter.
Ford will invest $1.3 billion in the Chihuahua, Mexico, where it will set up diesel engine auto part factory, whilst the remaining $1.2 billion will be spent on a transmission plant on the Guanajuato state. Most of the cars manufactured from Mexico are exported mainly to North American markets, due to its low cost labor force, and the fact that the company is Mexico’s fourth largest auto exporter.
The decision by the corporate giant to further strengthen its foothold in the Spanish speaking country comes, as a string of automakers are among their way into Mexico for the past several years, thanks to proximity to the American market, cheap labor, and a number of free trade agreements that the country has signed up. Toyota is also among its move by announcing close to $1 billion of investment, to produce over 200000 units of cars every year.
Whilst Ford has rebounded remarkably from the recession by not demanding for a bailout managing profits in nearly every nook of the world, there are some questions regarding its performance in the European and South American markets, where the dynamics of the markets there are quite different.
The European car market has not gone ‘out of the woods’ yet. Ford predicted that just like last year, 2015 would not be the year in which the company will turn around its operations. In fact, it has slashed its long-term profit forecast for the region, from $0.06-$0.08/share to $0.03-$0.05/share, by 2020.
Most of the blame goes to the Russian market that has been hit hard by economic sanctions due to the Ukrainian conflict. It was hoped that the European market will take time to turn around but still contribute to its bottom line, but that seems to be a misguided notion now. In all retrospect, Ford’s European and UK operations never add much to its earnings.
The broader fundamentals look positive, as low oil prices are helping to address the inflationary problems, but that is not going to affect the amount of corruption of the creaking infrastructure. With the October 2015 elections on the horizon, many people hope that voters get a clearer sense to vote for the one that has a clearer business outlook, but not to be labeled as pro-business, so as to not lose touch with voters.
In conclusion, Europe operations may still feel the pain for the next few years till 2017. The same will be the case in South America, but a substantial improvement is forecasted for later this year as well as next.
Ford will invest $1.3 billion in the Chihuahua, Mexico, where it will set up diesel engine auto part factory, whilst the remaining $1.2 billion will be spent on a transmission plant on the Guanajuato state. Most of the cars manufactured from Mexico are exported mainly to North American markets, due to its low cost labor force, and the fact that the company is Mexico’s fourth largest auto exporter.
The decision by the corporate giant to further strengthen its foothold in the Spanish speaking country comes, as a string of automakers are among their way into Mexico for the past several years, thanks to proximity to the American market, cheap labor, and a number of free trade agreements that the country has signed up. Toyota is also among its move by announcing close to $1 billion of investment, to produce over 200000 units of cars every year.
Whilst Ford has rebounded remarkably from the recession by not demanding for a bailout managing profits in nearly every nook of the world, there are some questions regarding its performance in the European and South American markets, where the dynamics of the markets there are quite different.
The European car market has not gone ‘out of the woods’ yet. Ford predicted that just like last year, 2015 would not be the year in which the company will turn around its operations. In fact, it has slashed its long-term profit forecast for the region, from $0.06-$0.08/share to $0.03-$0.05/share, by 2020.
Most of the blame goes to the Russian market that has been hit hard by economic sanctions due to the Ukrainian conflict. It was hoped that the European market will take time to turn around but still contribute to its bottom line, but that seems to be a misguided notion now. In all retrospect, Ford’s European and UK operations never add much to its earnings.
The broader fundamentals look positive, as low oil prices are helping to address the inflationary problems, but that is not going to affect the amount of corruption of the creaking infrastructure. With the October 2015 elections on the horizon, many people hope that voters get a clearer sense to vote for the one that has a clearer business outlook, but not to be labeled as pro-business, so as to not lose touch with voters.
In conclusion, Europe operations may still feel the pain for the next few years till 2017. The same will be the case in South America, but a substantial improvement is forecasted for later this year as well as next.
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