General Motors, slowly pulling itself out of its long slump, had record third-quarter earnings, while Chrysler, faced with the heavy costs of keeping up with the sales incentives of GM and Ford, saw its profit drop sharply, the two companies reported Thursday.
GM said it earned $859.2 million in the third quarter, marking the first time since last year that it earned more than Ford on a quarterly basis. On Wednesday, Ford reported third-quarter profit of $856.3 million.
GM said a series of new car launches, along with its continued cost cutting and modernization, led to its stronger performance. Its overseas operations, like Ford’s, also helped boost earnings above many analysts’ expectations.
“We are seeing increasingly strong bottom-line benefits of the reindustrialization undertaken by GM in the 1980s,” said GM Chairman Roger Smith and President Robert Stempel in a joint statement. Through the first three quarters of 1988, GM’s combined car and truck sales in the United States were 3.5% ahead of last year’s pace, with a 12% gain in truck sales compensating for more stagnant car volume.
For the quarter, GM said it sold 1,766,000 vehicles to its dealers worldwide, up 7.6% from the third quarter of 1987.
Meanwhile, the auto maker said cost cuts of $3.8 billion in the first nine months of 1988 led to better profit margins.
Chrysler’s profit of $112.5 million, however, was down by more than 50% from last year, mainly because of the costs incurred from offering rebates.
Because it is smaller and thus more vulnerable to foreign competition than GM and Ford, Chrysler has in recent quarters shown a greater willingness than its bigger rivals to sacrifice short-term profits to get a larger share of the market, analysts say.
As a result, its market share has increased. Its combined car and truck share in the United States and Canada rose to 13.6% during the quarter, up from 12.7% during the same period last year.
“While the imports’ market share was slipping, ours was improving,” crowed Chrysler Chairman Lee A. Iacocca.
But the cost has been high. Matching GM and Ford on incentives cut into Chrysler’s profit margins during the quarter, the firm acknowledged. Chrysler was also hurt because its Newark, Del., plant was shut down for model changeover throughout the quarter, reducing production capacity.