It’s a workable, proven plan with a high chance of success. And that means that Ford — which earned $8 billion before taxes last year, while losing $1.75 billion in Europe — could see that total rise to close to $10 billion within a few years, even if nothing else changes.
But there’s more good news: A big Ford effort in Asia should add even more to the bottom line — and soon.
Building a big presence in Asia
China’s automotive market has quickly grown to be the biggest in the world, with more than 19 billion vehicles sold last year. Big global names dominate the market: General Motors Company (NYSE:GM) and Volkswagen AG (ADR) (PINK:VLKAY) are the leading players, but nearly all of the global automakers are represented — along with a slew of domestic Chinese companies, all fighting for traction.
Ford was a latecomer to this party, not arriving in earnest until long after GM and VW had established a commanding presence in the country. But it has been moving aggressively to make up for lost time: Ford Motor Company (NYSE:F) has already invested more than $5 billion to build factories and other resources in the region and has promised a lineup of 15 new models by 2015, all drawn from — you guessed it — Ford’s acclaimed global lineup. The first of those, the Focus, was rolled out last spring.
In China, the Ford Focus is positioned as a premium offering, and it has rapidly become a best-seller. Ford’s sales in the first two months of 2013 were up 46% over the same period in 2012. Ford just rolled out a version of its Escape SUV — called the Kuga — to strong reviews in China, and it plans to bring more SUVs, including the Explorer, to the country later this year.
So far, Ford hasn’t made much of a profit in China, because it has been reinvesting so heavily in expansion efforts. But those efforts are expected to start paying off within a couple of years: Ford expects 70% of its overall growth to come from its “Asia Pacific Africa” region by 2015, and China will be the key driver of that growth.
The upshot: Ford’s profits are on track to grow significantly
Long story short, here’s the case for investing in Ford in a nutshell: Having proved that its “One Ford” approach is a winning formula in North America, Ford is in the process of implementing it in Europe and Asia — and the company’s profits should grow significantly over the next few years as a result.
The article Yes, Ford Is Still a Buy originally appeared on Fool.com and is written by John Rosevear.
Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. The Motley Fool recommends Ford and General Motors and owns shares of Ford
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