Ford Profit Up 121%; Chrysler Off
Ford Motor Co. on Thursday posted record earnings for the third quarter despite costly sales incentives programs, while General Motors Corp. and Chrysler Corp. reported steep declines in net income.
Ford’s net income rose 121% to $693.3 million from $312.1 million a year earlier. Ford’s profits far surpassed those at much larger GM, where third-quarter net income totaled $263.7 million.
For the record:
12:00 a.m. Oct. 25, 1986 FOR THE RECORD
Los Angeles Times Saturday October 25, 1986 Home Edition Business Part 4 Page 2 Column 2 Financial Desk 1 inches; 25 words Type of Material: Correction
Ford Motor Co. revenue for the third quarter was misstated in Friday editions. The company had revenue of $14.37 billion in the latest quarter, compared to $11.6 billion a year ago.
Ford’s revenue increased to $936.8 million from $343.8 million in 1985.
“It really wasn’t a fluke, given that the strength in their sales was based on the attractiveness of their product line,” said Jeannette Garretty, a Bank of America auto industry analyst.
Despite record third-quarter worldwide sales of $5.26 billion, compared to $4.56 billion for the 1985 period, Chrysler’s third-quarter net income fell 25.7% to $234.9 million from $316.2 million in the year-ago quarter.
Chrysler Chairman Lee A. Iacocca blamed the decline in quarterly profit on the low-interest sales incentives war launched by GM in late August and the “cost of competing.”
The incentives programs, most of which ended in early October, cut into profits for all the Big Three auto makers.
General Motors began offering the subsidized financing to clear out 1986 model inventory backlogs.
“Their costly strategy worked,” said auto analyst Arvid Jouppi of Arvid Jouppi Associates in Detroit.
Unlike GM, both No. 2 Ford and No. 3 Chrysler were enjoying strong sales in July and August before the incentives battle began and both would have made more money without the low-interest subsidies, Garretty said.
But Ford’s profits suffered less than Chrysler’s because Ford’s more profitable cars, including its popular Taurus and Sable models, were excluded from the programs and because its production costs are lower, she said.
Chrysler, meanwhile, was fighting for market share and cut its profit margin by cutting the prices on its least-profitable cars, including Omni and Horizon, and offering incentives as low as 2.4%, Jouppi said.
At the same time, Iacocca said, Chrysler continued to invest heavily in its plants and products.
“We did all of that and still had the second-best third quarter (in pretax earnings) in our history,” Iacocca said.
