Ford's China Arm Raises Funds - Analyst Blog

Chongqing Changan Automobile, a joint venture partner of Ford Motor (F”>F) in China, has revealed that it will raise up to 4 billion yuan ($600 million) by selling shares at 9.74 yuan each. The Chinese automaker will use the net proceeds from sale to expand production capacity.

Presently, Ford owns a 35% stake in Changan Ford Mazda, with Changan holding 50% and Mazda 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 denied of having any plans of dissolving the JV.

Ford’s sales in China grew 40% in 2010 with higher sales of Focus compact and Fiesta subcompacts. Changan Ford sold 403,283 vehicles, an increase of 34% from the 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 (GM), posted a 29% increase in sales in the country to 2.35 million vehicles.

The Chinese auto industry being the apple of Beijing’s eye was further boosted by government incentives (which may not be continued this year) that coaxed car owners to shift to more environment-friendly and fuel-efficient cars and minivans. J.D. Power and Associates has predicted sales in China to grow by 10.5% for 2011.

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.

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. 

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, consistent 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.

 
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