Ford Profit Drops; Car Introductions, Sales Slump Cited
Burdened by sluggish domestic sales and the heavy costs of introducing important new car lines, Ford had a 7% drop in first-quarter earnings, the company reported Thursday.
The No. 2 auto maker said its net income fell to $728.3 million on worldwide revenue of $14.79 billion during the first three months of the year, down from last year’s earnings of $783.3 million on revenue of $13.25 billion.
Ford said the decline came in part because the company incurred big expenses both when it launched its new Ford Taurus and Mercury Sable intermediate-size models at the beginning of the year and when it was forced to offer sales incentives to lure buyers into dealer showrooms.
Still, Ford’s first-quarter performance was slightly better than most analysts had expected, and Wall Street remains optimistic about the company’s prospects for the second quarter.
Since some of its plants have recently been shut down to retool for new models, Ford has not built up the excess car inventories that now plague General Motors and Chrysler. As a result, analysts believe that the company is now ready to run its plants at close to capacity in the second quarter, bolstering its earnings.
“Of the Big Three, their earnings should hold up the best in the second quarter,” said Michael Luckey, automotive analyst with Shearson Lehman Bros.
Ford was the last of the major domestic auto companies to report first-quarter earnings; all three major producers posted declines during the three months. Combined, GM, Ford and Chrysler earned $2.15 billion during the quarter, down 8.9% from last year’s level of $2.36 billion.
In the United States, where its car sales fell 11.1%, Ford earned $596 million during the quarter, down 4.8% from 1985’s $626 million. Overseas earnings, depressed by a decline in Canadian profit, fell to $132 million, down 15.9% from 1985’s $157 million.
Lower automotive earnings were partially offset by strong performances from two of Ford’s biggest subsidiaries.
Ford Motor Credit, the auto maker’s financial services arm, posted net income of $136 million, up 39% from last year’s $98 million.
San Francisco-based First Nationwide Financial Corp., a big S&L; acquired by Ford last December, earned $22 million, double last year’s profit of $11 million.
