Ford (NYSE:F) announced $1 Billion factory in Gujarat India. In part to satisfy Indian demand for economic cars. In part to satisfy global demand for economic cars. A Globe and Mail article based on a Mumbai Reuters story also mentioned a new plant in Thailand and four in China.
No talk about the currency used to finance the facilities. Of course the local labour and contractors will be paid in local currency. But what currency was the source? Given the falling US Dollar the local currencies are becoming more expensive. You know the finance guys at Ford have it mapped out and they know when they have to pay bills.
The plants become fixed assets denominated in other currencies. Does Ford hedge or should we stop reading their statement because everything is converted back to US Dollar.
Lets assume Ford establishes foreign fixed assets of say $7.5 Billion and currency has a negative fluctuation of some 5% . That equates to $375 million in adverse valuation. In a cyclical business that can be a lot.
Ford has raised some $19 Billion this year. Probably almost all of it in US Dollars.
Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours. I do admire the Ford brand but I am not inclined to buy cheap sub compacts.
- Ford to invest $1bn in India unit (bbc.co.uk)
- Ford to Build Its Second India Factory (online.wsj.com)
- Ford to build $1-billion car plant in India (theglobeandmail.com)
- Summary Box: Ford product investment cuts profit (seattlepi.com)
- Ford $F goes Canadian looking for huge govt handouts #cd4platform #automotive (financialskeptic.wordpress.com)
- Global Ford Fiesta Launch in Mumbai (indiandrives.com)
- New Ford Fiesta sedan launched in India (panasianbiz.com)