Ford plant closures to boost overseas profitability: JP Morgan

    (Reuters) – Ford Motor Co’s decision to close three factories in Brazil will reduce its losses and allow it to focus on increasing profitability in its underperforming international segment, analysts at JP Morgan said Tuesday.

    The second-largest U.S. automaker on Monday said it would take pre-tax charges of about $ 4.1 billion to shut down Brazilian plants, which had been underused for a while due to pandemic-related restrictions, affecting 5,000 seats. work.

    Shares in the company gained 3% after Monday afternoon’s announcement and were more or less stable in Tuesday’s premarket trading at $ 9.31.

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    Ford said the move was part of a previously announced $ 11 billion global restructuring, of which it has already taken over $ 4.2 billion in the third quarter of 2020. An additional $ 2.5 billion is expected to book. in the fourth quarter and approximately $ 1.6 billion in 2021..

    JP Morgan analyst Ryan Brinkman said in a statement that the move came at a time when investors were complaining about the absence of a path to profitability for South American companies.

    “We expect the move to quickly reduce losses in its South American operations, for which we now model a break-even result in 2020 versus a previous $ 300 million loss.”

    The brokerage raised its Ford share price target by 10% to $ 11.

    Credit Suisse analysts also said the plant shutdown supported Ford’s path to improving margins and that a smaller footprint made sense.

    Reportage by Aniruddha Ghosh in Bengaluru; Editing by Shinjini Ganguli

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