GM, Ford Suffer Huge Losses in Third Quarter

General Motors Corp. and Ford Motor Co., the nation’s largest auto producers, posted third-quarter losses totaling $1.6 billion Tuesday, in what is shaping up to be the worst financial year in U.S. automotive history.

GM, which hasn’t made money since the second quarter of 1990, said that, worldwide, it lost $1.1 billion for the July-to-September period. Ford’s fourth consecutive quarterly loss came to $574.4 million.

When Chrysler Corp. reports losses expected to exceed $200 million later this week, Big Three losses for the year to date will total more than $5 billion, putting 1991 well ahead of Detroit’s record 1980 loss of $4.5 billion. And industry analysts say the prospects for a dramatic fourth-quarter improvement are slim.

GM and Ford blamed their financial woes chiefly on the U.S. economy, whose painfully slow recovery has kept consumers too financially insecure to buy cars. Top executives at both companies said they are confident that the cyclic industry will eventually pick up again, as it has in the past. But they did not express much hope for a profitable fourth quarter.

“There isn’t that much we can do other than wait for the economy to improve,” said David McCammon, vice president for finance at Ford.

Although the losses are massive, both Ford and GM have the resources to weather current difficulties. Some analysts have speculated about Chrysler’s ability to pull through, but Chairman Lee A. Iacocca said last week that new products will rescue the ailing company.

Discounts to buyers have squeezed profits at the Big Three auto makers; still, rebates are expected to continue.

Layoffs are not expected for auto workers, because all three manufacturers say they will increase production at the end of the year in anticipation of a gradual sales recovery.

The third quarter has historically been the weakest for the auto industry, with production reduced as factories close down to retool for the coming model year. But industry analysts said poor sales made this year especially brutal.

The anemic sales rate continues to hover at levels 2 million to 3 million vehicles below the annual 15.5 million generally considered to be a good year for the industry. It has driven auto makers to offer price discounts averaging around $1,000 per vehicle in an effort to attract customers.

In addition to the pressures of the sluggish economy, analysts said, auto makers are grappling with structural changes in the domestic auto business that have made it possible to build more cars than people want.

“There’s enough excess capacity that, even as sales expand, people are going to be using pricing as a way of capturing sales. And, when you need to price aggressively, your profit margins get squeezed,” said Clifford Swenson, an analyst with Jacobs Automotive in Little Falls, N. J.

The expansion by Japanese auto makers of their U.S. plants has made turning a profit in the U.S. market especially difficult. Ford lost $197 million in its core U.S. automotive operations in the third quarter of 1991.

GM does not break out its North American earnings separately, but a company executive said earlier this year that the nation’s No. 1 auto maker--which is closing excess plants to get its production capacity in line with its reduced market share--would not make a profit in North America until 1993.

Analysts say that the Japanese auto makers, whose production costs are lower than those of the Big Three, are losing money in the United States, even as they push to increase their collective share of the new car market.

Ford posted record profits during the mid-1980s and boasted that it had grown lean enough to survive a recession without losing money. But the results at Ford were especially bad, analysts said Tuesday. The company attributed the deterioration of its financial position to the double whammy of recessions in the United States and England, its two major markets.

GM’s third-quarter 1991 loss came on $28.9 billion in revenues, down 6.2% from last year. In the same period last year, GM lost $2 billion, but that figure reflected a $2.1-billion accounting charge against earnings to pay for plant closings.