Ford Calls Off Joint Venture With Mahindra; Street Says Hold

Ford Motor announced that it has decided to pull out of a proposed joint venture with India’s Mahindra & Mahindra citing ongoing global economic and business challenges.

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Ford (F) said, “the outcome was driven by fundamental changes in global economic and business conditions – caused, in part, by the global pandemic – over the past 15 months. Those changes influenced separate decisions by Ford and Mahindra to reassess their respective capital allocation priorities.”

The two companies entered into an agreement in October 2019 under which Ford was expected to transform its Indian operations into a joint venture that would be majorly controlled by Mahindra. The deadline to sign a formal joint venture agreement between the two companies was Dec. 31, 2020. (See F stock analysis on TipRanks)

Ford now intends to continue its standalone operations in the country. The US automaker stated that it “is actively evaluating its businesses around the world, including in India, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8% company adjusted EBIT margin and generate consistently strong adjusted free cash flow.”

On Dec. 21, Benchmark analyst Michael Ward raised the stock’s price target to $12 (36.5% upside potential) from $11 and reiterated a Buy rating, citing improving industry sales trend in North America along with Ford’s restructuring initiatives, inventory replenishment, and new products.

As a result, Ward expects the company’s earnings to accelerate in 2021 and further improve in 2022.

The stock scores an analyst consensus of a Hold based on 9 Holds, 3 Buys and 1 Sell. The average price target of $9.35 implies upside potential of about 6.4% to current levels. Shares have declined by about 5.5% in 2020.