(Reuters) – Ford Motor Co’s decision to close three plants in Brazil will cut its losses and allow it to focus on boosting profitability in its underperforming international segment, J.P. Morgan analysts said on Tuesday.
The United States’ No. 2 automaker on Monday said it would take pretax charges of about $4.1 billion to close the Brazilian plants, under used for a while due to pandemic-related restrictions, affecting 5,000 jobs.
Shares of the company gained 3% following the announcement on Monday afternoon and were roughly steady in premarket trading on Tuesday at $9.31.
Ford said the move was part of a previously announced $11 billion global restructuring, of which it has already taken a charge of $4.2 billion in the third quarter of 2020. It expects to book another $2.5 billion in the fourth quarter and about $1.6 billion in 2021.
J.P. Morgan analyst Ryan Brinkman said in a note the move came at a time when investors had been complaining of the absence of a path to profitability for the South American businesses.
“We expect the move to quickly reduce losses in its South American operations, for which we now model a breakeven result in 2020 compared with a loss of $300 million prior.”
The brokerage raised its price target for Ford’s stock by 10% to $11.
Credit Suisse analysts also said the plant closures supported Ford’s road to improved margins and that a reduced footprint made sense.
(Reporting by Aniruddha Ghosh in Bengaluru; Editing by Shinjini Ganguli)
