EARNINGS : Ford and GM Report Steep Drops in Income
The nation’s top two auto makers, General Motors Corp. and Ford Motor Co., reported sharply lower second-quarter earnings Thursday.
* GM’s quarterly profit fell 38% from the year-ago period to $900.1 million as costly incentives were put into effect to draw buyers into showrooms. Revenue edged up to $33.9 billion from $33.5 billion.
Through the first six months of the year, GM said its earnings fell 46.7% to $1.6 billion on revenue of $64 billion, a 4.2% decline.
* At Ford, the nation’s No. 2 car maker, earnings for the same period plummeted 45% to $770.7 million. Revenue was $26.9 billion, an increase of $982 million from the year-earlier period.
For the first half, Ford’s earnings fell 56.7% to $1.2 billion as revenue fell 2.5% to $50.5 billion.
In the United States, the auto makers struggled with a 6.3% drop in sales from a year ago despite costly incentives. A slump in usually robust overseas operations further reduced income.
Ford expressed some optimism: “We believe our (market) share will improve with full availability of our new 1991 products,” Ford Chairman Harold A. Poling and President Philip E. Benton said in a statement. During the first half of the year, Ford’s share of the U.S. car market was 21.3%, down one point from its share for all of 1989.
But GM managed to pick up market share in the quarter, and was the only U.S. car maker to do so. It noted that it held 36.5% of the U.S. passenger car market and 34.4% of trucks. Both were above the prior year’s level, GM said, although it did not give the previous figures.
Both companies said their second-quarter earnings were dented by economic problems in Brazil, where inflation was running at an annual rate of more than 1,000% until the government put the brakes on the economy earlier this year with such moves as a currency freeze.
Both sets of earnings were in line with what Wall Street analysts estimated.
Analyst Scott Merlis of Morgan Stanley & Co. of New York said GM’s and Ford’s automotive earnings were actually a shade better than he had expected in light of Brazil’s troubles and increased tax payments.
“The earnings are much better than they look,” he said.
Ford and GM each have large operations in Brazil--GM its own and Ford with West German auto maker Volkswagen AG in the Autolatina joint project.
“The culprit continues to be incentives,” said Wertheim Schroder analyst John Casesa. He said incentives, which are used to lure customers into dealer showrooms, are averaging about $1,000 a car.
Chrysler Corp. is expected to announce second-quarter profits Tuesday. Analysts expect net income to be about half the $341 million the company earned during the period last year.
Ford said lingering effects of strikes in Britain and Belgium contributed to sharply lower European earnings, longtime strengths for the company.
In Europe, Ford had labor problems in the United Kingdom in the first quarter and in Belgium in the second.
