Ford Posts Record Net for 2nd Year in Row
Ford Motor Co. said Wednesday that its earnings rose 55.5% to $2.91 billion in 1984, setting a record for the second consecutive year despite a 7.7% decline in fourth-quarter earnings.
Ford said nearly $2.4 billion of its annual earnings came from its operations in the United States, which have been buoyed by the recovery in sales of U.S.-built cars and continuing restraints on Japanese imports.
Ford’s overseas operations, which kept it afloat during the recession, earned $516 million last year. In Europe, where Ford took over Continentwide sales leadership for the first time in its history, the company earned $147 million.
The company said its earnings fell to $721 million in the fourth quarter from $781 million during the same period of 1983, largely because it is running out of the tax credits it had built up during the recession, when it had huge losses.
Ford had announced previously that its after-tax fourth-quarter earnings would be down, despite an increase in its operating income.
“They had telegraphed that their after-tax earnings would be down, so it isn’t a surprise,” said Richard Hayden, automotive analyst with Mario Gabelli & Co., a New York investment firm. He added that the decline in Ford’s earnings isn’t a sign that the auto industry’s recovery is running out of steam.
Ford’s earnings gains for all of 1984 came mainly on the strength of a 22.5% increase in car sales and a 24.6% rise in truck sales in the United States in 1984.
The company sold 5.67 million cars, trucks and tractors worldwide last year, up more than 13% from sales of 5 million vehicles in 1983, when Ford set its previous earnings record of $1.87 billion.
Ford refused to say how much of its profits from U.S. operations will go to workers in the form of profit-sharing payments or executives in the form of bonuses.
The announcement of record earnings follows a report last week by General Motors Corp. that it earned a record $4.5 billion in 1984, while Chrysler Corp. is expected to announce record earnings today.
The Reagan Administration currently is debating whether to extend quotas on imports of Japanese cars for a fifth year once they expire March 31.
The quotas were imposed at the depth of the recession to help the U.S. industry get back on its feet.
Critics of quotas argue that record profits in 1984 prove that Detroit no longer needs to be protected from Japanese competition.
So, in an apparent attempt to prove that Ford still needs the protection, new Ford Chairman Donald E. Petersen and President Harold A. Poling stressed in a joint statement that “one or two good profit years don’t necessarily repair a balance sheet that was badly hurt in the early 1980s. . . . Ford’s financial condition remains substantially diminished from historical levels.”
Most analysts expect that Ford’s earnings will be flat or may even decline slightly in 1985, its first full year in which it will not benefit from the use of investment tax credits built up as a result of its massive capital investments in new product programs during the auto slump.
“But the violent cyclical swings we had before in autos seem to be behind us, at least for now,” analyst Hayden said. He noted that Ford and the other domestic auto makers have reduced their break-even points so dramatically that they can continue to make money even if auto sales drop off substantially.
