Ford shares rebound on Wednesday, auto maker to place India assets into joint venture with Mahindra

According to a report by Bloomberg, citing sources familiar with the matter, Ford Motor Company (F) is on track to move the majority of its Indian assets to a joint venture with Mahindra & Mahindra Ltd.

The decision comes after the US company did not manage to make significant inroads for over 20 years in a market, dominated by Suzuki Motor Corp’s cheap, fuel efficient vehicles.

Ford shares closed higher for the third time in the past twelve trading sessions in New York on Wednesday. It has also been the sharpest daily surge since September 9th. The stock went up 0.99% ($0.09) to $9.20, after touching an intraday high at $9.23, or a price level not seen since September 23rd ($9.23).

Shares of Ford Motor Company have risen 20.26% so far in 2019 compared with a 19.07% gain for the benchmark index, S&P 500 (SPX).

In 2018, Ford Motor Co’s stock went down 38.75%, thus, it underperformed the S&P 500, which registered a 6.24% loss.

According to the sources, who wished to remain anonymous, Mahindra & Mahindra Ltd. is to have a stake of 51% in the new entity. At the same time, Ford is to be granted equal voting rights and board representation.

The venture is expected to hold the majority of Ford’s Indian assets, including two vehicle factories the company operates in the South Asian country. On the other hand, the new entity will not include Ford’s global business services unit – an export-oriented engine facility in Sanand, the automobile hub of the Indian state of Gujarat.

The sources noted that the compensation for Ford would likely be well below the $2 billion it had already invested in India. The US auto maker’s market share in the country is estimated to less than 3%.

“Ford remains committed to growing its customer base and product portfolio in the world’s fourth-largest automobile market, and will continue to make in India, for India and the world,” Lori Arpin, a spokesperson for the company said in a statement.

According to the sources, if an agreement is indeed reached, India’s Mahindra will be allowed to sell certain Ford vehicles in developing countries under its own brand.

Analyst stock price forecast and recommendation

According to CNN Money, the 15 analysts, offering 12-month forecasts regarding Ford Motor Company’s stock price, have a median target of $10.00, with a high estimate of $13.00 and a low estimate of $8.20. The median estimate represents an 8.70% upside compared to the closing price of $9.20 on September 25th.

The same media also reported that at least 10 out of 18 surveyed investment analysts had rated Ford Motor Company’s stock as “Hold”, while 6 – as “Buy”. On the other hand, 1 analyst had recommended selling the stock.