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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 (SIX:CSGN) analysts also said the plant closures supported Ford’s road to improved margins and that a reduced footprint made sense.
