Ford’s $1.62-Billion Net Sets Industry Record in Quarter

Ford, on a two-year roll that has seen it surpass General Motors as the leading cash machine in the American auto industry, said Thursday that it set a record for single-quarter profitability with first-quarter earnings of $1.62 billion.

Ford’s profits, up 9% from last year, represented the most money any auto company has ever earned in a single three-month period, Ford officials said.

The first quarter was also the seventh time in the last eight quarters that Ford has out-earned GM. The world’s largest auto company and the traditional leader in profitability posted first-quarter earnings of $1.09 billion earlier this month.

Ford also outperformed GM on an annual basis both last year and the year before. When Ford took over earnings leadership in 1986, it was the first time since 1924 that GM had not posted greater earnings than its cross-town rival.

Analysts now say that Ford’s enormous earnings have given it a more stable financial footing than GM, despite the far greater assets of GM.

“Ford is now financially stronger than General Motors,” says Ronald Glantz, auto analyst with Montgomery Securities. “At the end of the first quarter, Ford could have paid off all of its debts and still had $6.9 billion left over. GM, at the end of the quarter, (if it had tried to pay off all its debts) would have been $1.5 billion shy.”

Ford now has $10 billion in savings--in the form of cash and marketable securities. GM, by contrast, has just over $5 billion.

The first-quarter increase in profit came even though Ford’s earnings in the United States fell as a result of higher costs related to rebates and incentives it offered to buoy car sales. Ford’s once troubled overseas operations offset the domestic decline, however. Overseas earnings hit a new record $580 million, despite a two-week strike at Ford of Britain.

Even though earnings suffered domestically, the sales incentives helped to dramatically increase Ford’s share of both the car and truck markets in the United States. Ford’s car market share rose 1.8 percentage points to 21.8%, far above the 16% to 17% range that Ford dropped to during the recession of the early 1980s.

Analysts said Ford now seems to be taking back market share from the Japanese, thanks both to the yen’s rapid appreciation and to a new effort to hold the line on price increases while aggressively pushing incentives.