Ford’s Finance Subsidiary Shutting Down in Brazil, Argentina

Ford Motor Credit Company, the financial services arm of automaker Ford Motor (F), is exiting the Brazilian and Argentinian markets. It expects to take as much as a $375 million financial hit as a result of its decision to wind down operations in these countries.

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Ford Credit provides automotive financial products and services to Ford and Lincoln dealers and their customers, and supports the sale of Ford and Lincoln vehicles globally.

The unit revealed its plan to end operations in the countries in a regulatory filing. The unit plans to stop originating receivables in the markets by the end of the year. It will begin the process of winding down operations, but is yet to determine how long it will take to complete the exit.

Ford Credit expects up to $375 million in pre-tax charges in connection with its decision to leave Brazil and Argentina. The bulk of the charges will be non-cash and include losses of as much as $365 million tied to foreign currency translation.

In addition to the non-cash charges, Ford Credit plans to spend about $10 million on employee separation payments. Ford expects to recognize the majority of the losses and costs related to the unwinding of operations in Brazil and Argentina in 2021. (See Ford stock chart on TipRanks).

Barclays analyst Brian Johnson recently reiterated a Buy rating on Ford stock and raised the price target to $17 from $15. Johnson’s new price target suggests 13.64% upside potential. The analyst noted stronger than expected pricing for Ford and better financial company performance.

Consensus among analysts is a Moderate Buy based on 9 Buys, 6 Holds, and 1 Sell. The average Ford price target of $15.25 implies that Ford shares are almost fully priced at current levels, with 1.94% upside potential over the next 12 months.

Ford scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.