Ford Motor Co. posted record earnings in the third quarter, the firm said Wednesday, despite a sharp drop in profits from its domestic auto operations, in part because of rapidly rising costs for raw materials.
Ford said it earned $856.3 million in the three months, up 22% from $703.2 million during the third quarter of 1987.
Virtually all of the increase resulted from soaring overseas earnings, which were up thanks to strong sales in Europe, Mexico and South America, said David A. McCammon, Ford’s vice president for finance.
Worldwide, Ford sold 1,362,000 cars, trucks and tractors during the quarter, up 10% from last year. The decline in U.S. earnings came, McCammon said, even though Ford’s third-quarter share of the American car market--21.3%--was the highest Ford had posted in a third quarter in 10 years. Ford’s share of the growing truck market rose to 28.9%, an increase of 1 percentage point over last year.
Paying More for Metals
McCammon said in a press conference, however, that rising raw material costs, as well as expenses related to offering rebates and other sales incentives, had depressed Ford’s profit margins in the United States. McCammon noted, for instance, that Ford was paying 25% more this year for the aluminum it uses in its cars and trucks, 28% more for copper, 10% more on plastics and 7% more for synthetic rubber.
The company was also producing more low-profit cars and fewer upscale products in the third quarter, mainly because production of its high-profit Ford Thunderbird and Mercury Cougar lines was curtailed for model changeover during the quarter. The company will introduce new versions of those cars in December.
As a result, while profit margins worldwide rose to 4.9% of sales, compared to 4.6% last year, the company’s domestic margins fell to 4.2% of sales, compared to 5.9% last year. “We do have a declining margin in the U.S.; that’s been the case all year,” McCammon acknowledged.