Ford Motor Company: Will Expansion in Mexico Rev Up F Stock?

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Over the last couple of years, automakers have been shifting their production strategies to include facilities outside of the country, especially in Mexico. And frankly, I don’t blame them. I think it’s nuts to ask United States automakers to keep all of their production in union states or strip them of the cost benefits of their rivals.

Will Expansion in Mexico Rev Up Ford Stock? (F)Hyundai, General Motors Company (GM), Kia, Honda Motors Co Ltd (ADR) (HMC) and BMW are just a few companies that have already made the shift, and earlier this week another name was added to the list.

Ford Motor Company (F) announced on Tuesday that it would be building a new assembly plant in Mexico. F stock will invest $1.6 billion into the facility, which will build small cars for export and is expected to create 2,800 jobs by 2020. Construction will begin this summer with plans to open the new plant in 2018.

Ford Stock Expanding Operations South

Now this isn’t Ford stock’s first venture into Mexico, as it already has two final assembly plants and one engine facility in the country. However, the news was met with controversy. Republican presidential candidate Donald Trump called the move “an absolute disgrace,” while United Auto Workers President Dennis Williams said it was “a disappointment and very troubling.”

Ford actually has a total of 8,800 employees in Mexico, where production counts for just 6% of the total. Here in the United States, Ford has 85,000 employees that contribute to 36% of total production. And Joe Hinrichs, president of Ford of the Americas, reminded folks that the company has invested $10.2 billion in the U.S. over the last five years. Mexico doesn’t seem to be catching up any time soon.

Plus, it’s not like the announcement came out of left field. It has been expected for months.

As I mentioned, I don’t think it’s fair to ask automakers to keep all of their production in the U.S. Going abroad means lower labor costs and a more favorable currency exchanges, and considering capitalism is king here in America, I can’t blame Ford stock or others for wanting to turn a better profit.

As Ford CEO Mark Fields said: “We are a global, multinational company and we will invest to keep us competitive and we will do what makes sense for the business.”

Now all that said, I’m still concerned about F stock as an investment. It has mostly lost market share to General Motors over the last two years, and while the big gamble with the F-150 is masked by the current insatiable appetite for pickups in the market, I’m concerned that the company has lost its way.

In the end, I’m not a buyer of autos right now, partly because of the loan bubble. But even if I were buying, Ford stock wouldn’t make my short list.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/04/ford-moves-mexico-means-stock/.

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