Sharply Lower Earnings for Big 3 Predicted

From Reuters

Production cutbacks and model changeovers will slash the Big Three auto makers' third-quarter earnings and the industry's long-hoped-for fourth-quarter rebound is in jeopardy, analysts said Tuesday.

Chrysler Corp. (which reports results today), General Motors Corp. and Ford Motor Co. will together earn about $1.14 billion for the July-September period, down from $2.23 billion a year earlier, the analysts estimated. GM and Ford will release their earnings figures next week.

Chrysler, still feeling the costs of launching its new minivan, is expected to earn about $331 million, down from $651 million.

Further, the core North American auto operations at GM and Ford will lose money because of product launch costs, factory downtime, inventory clearance and the recent strike by car haulers, analysts said.

"I think they'll both be in the red for the period," said Burnham Securities analyst David Healy. He noted that GM and Ford are expected to be profitable overall, though.

"These results have been mostly well telegraphed" to investors, he said.

Healy estimated that GM's North American operations lost between $250 million and $300 million in the quarter. Ford, which launched its new Taurus and Sable cars during the period, should post a North American loss of $150 million, he said.

GM was the auto maker hit hardest by a five-week Teamsters strike against Ryder System Inc.'s car hauling operations. Analysts say GM also suffered as more of its sales were in small cars and to rental fleets, which are less profitable.

GM is expected to report earnings of about $450 million, compared to $552 million for the 1994 period, according to analyst Ken Blaschke at Dean Witter Inc. Blaschke's estimate is near the low end of those for GM on Wall Street.

Of the three, Ford is expected to post the sharpest third-quarter decline--to about $362 million, or 27 cents a share, from $1.12 billion, or 93 cents a share, a year earlier, according to First Call, which tracks earnings estimates.

The No. 2 auto maker incurred huge product launch expenses during the quarter for Taurus and Sable and also for its new F-150 pickup truck. However, those vehicles should help Ford gain market share next year, Blaschke said.

Overseas operations did not provide much relief to GM and Ford during the quarter as factory downtime ate into profits.

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