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Ford to Gear Up Large Vehicle Production to Stay in the Race

Zacks

Ford Motor Company F, recently announced plans to boost production of two large sport utility vehicles (SUVs) by 25% in 2018, per Reuters. By revving production of the new Lincoln Navigator and Ford Expedition at its Kentucky factory, this second-largest automaker in the United States will be able to drive profit margins and take on rivals such as General Motors Company GM and Tesla, Inc. TSLA in the field of electric and autonomous vehicles.

In fourth-quarter 2017, Ford’s automotive profit margin declined to 3.7% from 5.7% in the year-ago quarter. Also, the company’s margins came in lower than that of its opponents such as General Motors and Fiat Chrysler Automobiles N.V. FCAU. In fact, the profitable U.S. large SUV segment is dominated by General Motors with its models such as Chevrolet Suburban and GMC Yukon. In January 2018, General Motors sold over 19,000 large SUVs whereas Ford managed to sell little less than 3,500 Expeditions and 1,300 Navigators.

Furthermore, increasing number of Americans are opting for of high-margin SUVs and pickup trucks over the passenger cars. Consequently, in the United States, passenger car sales declined to 36.8% of total light vehicle sales in 2017. Notably, the urge to raise profit, amid huge competition and changing vehicles preference pattern of its consumers, might have prompted Ford to take such a move.

In a year’s time, this Zacks Rank #4 (Sell) company has underperformed the industry it belongs to. The stock has declined 16.2% against the industry’s growth of 2.6%.



While Fiat Chrysler holds a Zacks Rank #2 (Buy), General Motors and Tesla carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Fiat Chrysler, General Motors and Tesla have an expected long-term growth rate of 19.1%, 10% and 25%, respectively.

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