GM Profit Drops 54%; Ford Net Skids 69%
Profit fell by 54% at General Motors Corp. and by 69% at Ford Motor Co. in the first quarter because of U.S. production slowdowns and problems with overseas operations, the companies said Thursday.
The figures, combined with Chrysler Corp.’s 80% drop in first-quarter net income, meant an overall 64% profit drop for the Big Three auto makers during the period.
But the results were not as bad as the 75% profit decline that analysts had expected for the companies, which are struggling with soft markets and intensified competition from foreign-based auto makers.
GM said it earned $710 million on revenue of $30.11 billion during the quarter. That compared to a $1.55-billion profit on revenue of $33.24 billion in the year-earlier period.
Ford said it made $506.2 million during the first three months of this year, compared to $1.64 billion during the same time last year.
Ford’s revenue fell 9% in the quarter, to $23.6 billion from $25.87 billion a year earlier.
Through the end of the first quarter, Big Three car and truck sales were 3.6% behind last year’s pace. By the end of April, sales for Big Three-North American made vehicles were 6.1% behind last year’s pace.
Economic uncertainty in Brazil, where Ford and GM have large presences, dented both companies’ overseas earnings, which in past years have shored up sagging North American profits. Strikes in the United Kingdom further hurt Ford’s earnings from its overseas operations.
David McCammon, Ford’s finance vice president, said Thursday that he expected the problems in Brazil to continue affecting the company’s earnings. Ford and West Germany’s Volkswagen AG are linked in the Autolatina joint venture in Brazil.
“I think we are going to see a material drag on Ford’s earnings from Brazil in the second quarter, largely because there has been no production there since the 15th of March,” said analyst John Kirnan of Kidder, Peabody & Co.
On that day, Ford shut its Autolatina plant after the government froze most savings in an attempt to halt runaway inflation.
The plant is back in operation, but it will take time to return production to pre-shutdown levels.
Kirnan and David Healy, of Barclays-BZW in New York, said cost-cutting programs, especially at Chrysler, softened the impact of severe production cuts in January and costs of incentives throughout the period.
McCammon said Ford spent about $1,000 in incentives for each car and light truck it sold during the quarter. In April, he said, that cost rose to about $1,200 per vehicle and predicted that the cost would drop back to about $1,000 this month.
GM and Chrysler decline to say how much they spent on incentives.
