Ford Motor (F) recently said that it would begin production of its new compact van, Transit Connect, in Craiova, Romania. Two years ago, the company bought a 72.4% stake in the state-owned Automobile Craiova for $88 million. At that time, it had promised to invest $1 billion to upgrade and expand car production in Romania. Therefore, the announcement is a step towards fulfillment of that objective.
Ford’s decision will no doubt be a boon for the Romanian economy, which has been going through tough times. In March, the International Monetary Fund provided the country with $17.1 billion in bailout fund to pull it out of a financial crisis.
Ford plans to manufacture 300,000 automobiles and 300,000 engines in Romania in the next 4 years. It will employ an additional 3,000 staff throughout the country and has invested 12 million Euros ($17.2 million) to train the workforce. The Romanian Government will also invest 143 million Euros ($182 million) through 2012 to support production at the Craiova plant.
The Transit Connect will be priced at 14,000 Euros to15,600 Euros, or $20,000 to $22,000 in Romania and the U.S., respectively. So far, Ford has sold 600,000 Transit Connects globally. We continue to recommend the shares of Ford as Neutral with a target price of $8.
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