Ford Motor Co. (F) is planning to reduce the production of the Fiesta hatchback in Europe due to plummeting demand in some key markets in the continent, according to media reports. Consequently, the automaker will stop the assembly of the car at its Cologne, Germany plant for 11 days in October and November. The Cologne plant is Ford’s main assembly plant in Europe for the Fiesta, which is its highest selling car in the continent.
While the automaker’s Europe sales are improving slowly, demand in three key markets, Germany, France and Italy, in the region fell in August. Moreover, demand in the second half of 2014 will likely be weak. In fact, Ford expects higher loss in the second half of 2014 as compared with the first-half loss of $180 million.
Hence, the company has decided to reduce production and has even applied for subsidies under the German government's "Kurzarbeit" short-work program. Under the program, companies can reduce workers’ hours in case of low plant usage and the government provides compensation to them for the reduced wages. This is aimed at saving jobs and was popular among companies during the recession. Ford has applied for the program for 4,000 of its 17,300 employees working at the Cologne plant.
Production cuts due to low demand in Europe are a common feature for Ford. Temporary stoppage of production to adjust production volume has been common for its Romanian plant since last year. The automaker stopped production of B-MAX at the plant for 35 days in 2013, while engine production was halted for 7 days. This has continued in 2014 as well.
At present, Ford carries a Zacks Rank #3 (Hold). Better-ranked auto stocks worth considering in the same sector include Tesla Motors, Inc. (TSLA), Nissan Motor Co. Ltd. (NSANY) and Tata Motors Limited (TTM). All of these have a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment