GM, Ford Profits Plummet in Period; Incentives Cited

Fourth-quarter profits plunged 50% at General Motors Corp. and 72.9% at Ford Motor Co. as the nation’s biggest auto makers on Thursday showed the impact of slow sales and costly buyer incentives.

The quarterly results completed a sharp drop in annual earnings for the nation’s Big Three auto makers, which have been struggling with an industrywide slump that has prompted plant closings and thousands of layoffs.

The results at GM, Ford and Chrysler Corp.--on Tuesday, Chrysler posted a $664-million loss for the quarter--will mean little or no annual profit-sharing payments this year.

GM posted a $700.2-million profit in the three months ended Dec. 31, down from $1.4 billion in the 1988 quarter. GM’s revenue during the October-December quarter, including non-automotive subsidiaries, fell to $31.36 billion from $32.43 billion a year earlier.

Ford reported fourth-quarter profit of $314 million, compared to $1.16 billion in the year-earlier quarter. Ford’s quarterly revenue in its automotive and financial services businesses amounted to $24.15 billion, compared to $23.91 billion in 1988.

The Ford earnings decline reflected a $424-million loss linked to the sale of its Rouge Steel Co. subsidiary. But even without that factor, fourth-quarter earnings were down 36.3%.

Industrywide, car and truck sales fell sharply when the 1990 model year began in October, mainly because of reduced buyer incentives and higher prices for the new vehicles.

Throughout November and December, auto companies funneled money into incentive programs--which comes directly out of profits--in an attempt to halt the slide.

Compounding the problems, the Big Three faced swelling inventories and prepared to lay off thousands of auto workers during the first quarter of this year. Those layoffs largely have been accomplished. Inventories of unsold vehicles have shrunk from a 91-selling-day level at year’s end to 70 days at the end of January.

Ford Treasurer David McCammon said the company spent an average of $800 in incentives for every car and truck it sold in the fourth quarter, slightly more than double the figure for the year-earlier quarter.

He said that on Dec. 31, Ford was spending about $1,000 on incentives for each of its vehicles.

As production and inventories get more in line with demand, McCammon said, auto makers should be able to rely less on incentives to control new-car inventory and sales.

For the first time since 1985, GM’s annual earnings outpaced those of No. 2 Ford.

GM’s annual profit fell 13.1% to $4.22 billion, on total corporate revenue of $126.93 billion, compared to a profit of $4.86 billion on revenue of $123.64 billion in 1988.

GM’s major subsidiaries reported earnings Wednesday. General Motors Acceptance Corp. and GM Hughes Electronics Corp. reported declines, but Electronic Data Systems Corp. said its profit grew with added data services customers.

Ford’s annual earnings fell 27.6% to $3.84 billion from $5.3 billion in 1988. Annual revenue rose to $96.15 billion from $92.45 billion.

Chrysler’s $664-million fourth-quarter loss was mainly due to a one-time $577-million charge for plant closings and costs of cutting jobs from its white-collar work force. Chrysler posted a profit of $433 million in fourth quarter 1988. Its annual profit plummeted 65.8% to $359 million.

Each of the auto makers said their performances in the United States suffered last year, meaning no profit sharing for Chrysler hourly workers, no bonuses for the company’s salaried employees and sharply lower profit-sharing payments to hourly workers at GM and Ford.