By on April 28, 2017

2017 Ford F-150 Lariat - Image: Ford

What a difference a few (hundred thousand) recalls make. In a sales market best described as stagnant, a widespread vehicle glitch can dog an automaker’s balance sheet. That seems to be the case at Ford Motor Company, which saw its first-quarter profit fall 35 percent on a combination of factors — not the least of which was a pair of recalls of engine fires and faulty door latches.

Elsewhere in the domestic market, General Motors rode to the financial finish line with a record post-bankruptcy net income while Fiat Chrysler Automobiles climbed further into the black.

Timing wasn’t on Ford’s side. A March call-back of 360,000 vehicles for an engine fire risk in North America joined an ongoing recall of numerous models for a glitch that causes doors to fly open. The automaker added another 210,000 vehicles to the door recall last month, joining 2.4 million vehicles already under recall.

Quality woes led to $467 million being stripped from Ford’s balance sheet through warranty costs last quarter, leaving the automaker with a $1.7 billion profit. Global revenue rose by 4 percent. Lower sales didn’t help the economic picture, though big-buck truck sales in North America offset losses in other regions. Ford has warned investors of a rocky year.

The gray skies over Dearborn don’t extend as far as the Renaissance Center. GM enjoyed a record first quarter with $2.6 billion in profit — a 33-percent increase. The automaker’s good fortune lies in the wallets of its Chinese and North American consumers, as well as in its popular truck and SUV lineup.

CEO Mary Barra ramped up the General’s diet last year in a bid for higher profits. In a break from the past, the automaker has toned down low-profit fleet sales in favor of retail transactions. Global Q1 revenue rose 10.6 percent.

At Fiat Chrysler, celebration sweaters are in order. The company recorded 34-percent profit growth compared to the previous first-quarter results, posting a net income of $698.2 million. Much of the gain comes from improved European sales — the continent’s profits grew 85 percent — and growth in Maserati sales spurred by the new Levante SUV. Once again, a utility vehicle comes to an automaker’s aid.

In the U.S., FCA’s first-quarter sales dropped 7.3 percent, though the coming two years will bring a host of new product introductions — including the next-generation Wrangler and Ram 1500. The automaker has its fingers crossed in the hopes that pricey plant and product investments will pay big dividends in North America, washing the bad taste of the failed Chrysler 200 and Dodge Dart out of Auburn Hills.

[Image: Ford Motor Company]

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58 Comments on “Detroit Money City: GM Leads the Pack as Ford Profit Sinks...”


  • avatar
    Corey Lewis

    That’s not a very nice boat, I’m not impressed.

  • avatar
    SCE to AUX

    GM will have to face the music pretty soon, because its inventory levels are out of control. Malibu and Camaro stock is almost 6 months’ worth each.

    I’m getting emails for offers of 16% off MSRP on a variety of vehicles, and that’s before negotiations begin.

    • 0 avatar

      Yeah certain models aren’t selling but they are making big bucks on the trucks and SUV’s still.

      • 0 avatar
        DenverMike

        They’ve already gone broke while making big bucks on trucks and SUVs. How far can those big bucks stretch? Just imagine if all their trucks were made in the US.

        Except big rebates this Fall could be into the billions more than last year.

        • 0 avatar
          APaGttH

          They went broke selling vehicles at a loss and trying to make it up in “volume.”

          Factories are most efficient when they run at capacity (LEAN manufacturing). A factory that runs at 95% capacity is far more expensive to run than a factory at 100% capacity.

          As for inventory GM has already said a 10 week shutdown is coming for retooling and that the inventory spike is to address this.

          I remind you that a former EIC with thongs of B&B cheering on predicted a bankrupt GM by now over “channel stuffing of GMT900 inventory, which spiraled to over 140 days.

          The inventory allowed GM to maintain sales volume while the new platform vehicles came out, kept profits up, and was never a problem.

          As for the issue of selling cars specifically – this is hardly a problem that is unique to GM.

          I’m sure Toyota will cut you a lovely deal on a Prius, Nissan will sell an Altima to anyone with a pulse, FCA can’t even build a car anyone wants at any volume, literally. Ford car sales are in free fall.

          GM however can’t build Colorado/Canyon fast enough, and I’m still waiting for the Encore/Trax to be that sales failure everyone predicted. Instead, everyone else now is building subcompact CUVs, a category GM created, and Encore sales keep going up.

          If you’ve priced the discount sitting on the hood in already, and making a profit on every unit you sell – there is no issue.

          When you’re selling W-body cars with sticker prices of $27K for $21K and it costs $30K to build them, and they are utterly uncompetitive…well, do the math.

          If you’re selling Epsilon II Impalas with a sticker of $38K for $32K and it costs $30K to make – that’s called profit.

    • 0 avatar
      dash riprock

      They have already stated that H2 will be more challenging as they have plans for 10 weeks of downtime to retool for new product launched. They expect that the days of inventory will return to 71 days by year end. Still guiding for $6-6.50 eps.

      GM may be a lot of things but they do appear to be better managed today then a decade ago.

      • 0 avatar
        DenverMike

        “…they do appear to be better managed today then a decade ago.”

        Right. There’s room for GM to improve greatly and still manage to suck moderately.

    • 0 avatar
      bd2

      It’s not like GM can just shut down production lines of the slow sellers willy nilly.

      GM has a longer than usual suspension of production planned for the summer during the switch-over to the next year models for its slower sellers.

      As for “going broke” – so did Chrysler and Ford would have done as well if they hadn’t been fortunate to have hit the credit markets before they froze (and even then, Ford came close to brink again, but C4C pretty much saved them).

      Yes, GM still had its issues, but things were already on an upswing; also didn’t help that activist (large) shareholders forced GM to do a share-buy back a couple of years earlier which robbed GM of a good chunk of its “rainy day fund.”

      Also, wouldn’t worry about the focus on big trucks and SUVs as GM is working on updating and increasing its crossover lineup.

      Even if the price of fuel rises, people will still be buying crossovers.

  • avatar
    Vulpine

    Now if only GM would realize there’s a huge, untapped market for truly COMPACT pickup trucks.

    • 0 avatar
      bikegoesbaa

      If only any global automaker was as smart as you, right?

      • 0 avatar
        Vulpine

        Just more observant.

      • 0 avatar
        xtoyota

        I guess I’m the second smartest guy because I do think a smaller truck would sell

        • 0 avatar
          Lou_BC

          A truly small truck would sell but in what numbers?
          I’m betting that GM’s Colorado isn’t appreciably cheaper to build than a Silverado. A 70’s era “Luv” built to modern standards isn’t going to be much cheaper either.
          So if build costs are similar but profit margins are not and sales volume is not assured, why bother?

          • 0 avatar
            Lorenzo

            GM knows how to build a cheap compact truck: chop the back off a Malibu, put in a box and leaf springs, and call it an El Camino.

          • 0 avatar
            Vulpine

            Reduce the size by more than 10% if you want to reduce the cost of manufacture. The compact truck should be a full 25% smaller than full sized if at all possible and when you consider the compact CUV/SUV it is a full 25% smaller than a full-sized SUV. Up-sizing the mid-sized truck to only 10% smaller raised the price of manufacture to similar levels.

          • 0 avatar
            Lorenzo

            @Vulpine: okay, chop the back off a Cruze, put in a box and leaf springs, and call it an El Camino. Another cost savings is using an existing platform and a majority of its parts for a different model, the way Ford, GM and Chrysler made wagons out of sedans.

            The thing about a compact truck is that it doesn’t have the hauling capacity, in terms of volume or weight, that a full size or mid size truck has. I see a lot of ancient compacts used by handymen and landscape maintenance people here in So. Cal. and a compact car with a box would sell very well.

          • 0 avatar
            Vulpine

            @Lorenzo: “The thing about a compact truck is that it doesn’t have the hauling capacity, in terms of volume or weight, that a full size or mid size truck has. ”

            You hit the nail on the head; that’s EXACTLY why a compact truck is desirable. Just today I loaded about 500 pounds of landscaping materials in the back of my 20-year-old Ranger and had capacity left over; I don’t need a truck capable of 1500 pounds and more. And I’ll tell you, that Ranger’s shorter body and shorter wheelbase allowed me to squeeze out of a parking spot DESPITE a full-sized rig getting loaded directly behind me and taking up half the aisle width in the lot. Had I been driving ANY full-sized rig or even current mid-sized model, that would have been impossible; I would have been forced to wait until that other truck moved. Even when I did own a full-sized truck, the bed never once carried more than 500 pounds; it was a gas-hogging waste of space. That’s why I sold it after three years with only 4000 miles more than I bought it with. I’ve got more miles on my Ranger in less than two.

          • 0 avatar
            Lou_BC

            @Vulpine – you can reduce the size by 25% but the manufacturing cost doesn’t drop by 25%.

          • 0 avatar
            28-Cars-Later

            If model size != production cost, why is nearly every sedan for sale post 2014 too small for human passengers in the rear seats?

            Someone tell me now it is not intentional.

    • 0 avatar
      newenthusiast

      I don’t know if its a huge market. Not in the US anyway, but I agree that there is one. I see lots of older Rangers and Frontiers, and even the occasional S-10’s and S-15/Sonomas. People are holding on to them and maintaining them.

      It depends on whether its a large enough market to be profitable, or if trucks that size can be built at a low enough cost to keep the MSRP a good distance away from the mid-sizers. The issue is that for most buyers, a jump up in size for minimal money makes sense for them once they are on the sales lot.

      I’m surprised that commercial customers didn’t make more noise about how compact pick ups make sense for them. That seems to be where I see most of the maintained older small trucks: fleet service.

      • 0 avatar
        Vulpine

        Honestly, a compact truck based on the average compact SUV/Crossover would take a bite out of the CUV market… which may be why they don’t want to do it yet. But the CUV market is getting saturated and we’re flat losing compact and mid-sized sedans to ‘bigger vehicles.’ A true compact pickup would be an almost ideal setup, especially for people who want an open bed but are not willing to accept the bloated size of modern trucks.

        Note: for all the hate of them, I saw two different early-’00s Colorados today in a short half-hour hop out to the store and back. While everyone else has been crowing about how the bigger Colorado is so much more popular, people are actually taking care of their older ones. These were both pretty clean, at least on the outside, and I live in part of the “rust belt”. A neighbor’s ’04 F-150 has very definite rust perforation in the rear wheel arches (he was grinding on them yesterday preparatory to welding in new metal) and neither Colorado had a hint of rust there.

        • 0 avatar
          Corey Lewis

          “But the CUV market is getting saturated and we’re flat losing compact and mid-sized sedans to ‘bigger vehicles.’”

          The manufacturer tends to want you to buy -more- car, so I doubt they see an issue with this phenomenon.

          • 0 avatar
            Vulpine

            Thank you for agreeing with me, Corey. The compact pickup would be an easy upgrade from compact/mid-sized sedans while still offering an open bed. People are tired of sitting on the ground, unable to see through the cars around them.

          • 0 avatar
            DenverMike

            A compact pickup with a usable-size bed means a 2-seater, and there’s the rub. A couple Vulpii would be all over it, and the occasional fleet buyer. And guess what they want to pay? You can bet, not enough! Cheapskates mostly. What do subcompacts sell for?

            Maybe they’ll want the Platinum Ranch or King Horn of compact pickups…

          • 0 avatar
            Vulpine

            Keep dreaming, DM. You haven’t been right about ’em yet, you know.

          • 0 avatar
            DenverMike

            Yep I’m the *dreamer*… US consumers are like no others, that’s what you refuse to comprehend. This isn’t Brasil, Mexico, Chili, Honduras or others.

          • 0 avatar
            Vulpine

            You’re right; US consumers are like no others. The US has the broadest mix of global lifestyles of any country in the world, meaning that ANY vehicle in the world will find someone in the US that wants it, no matter how high, or low, the price may be.

            And maybe that’s where you’re making your mistake. You’re so focused on what you and people you know like and want to the point you can’t imagine people different enough to want something different simply because they don’t need what you want. This country is made up of Europeans, Africans, Asians, and Native Americans, both North and South. Just because YOU don’t think people would buy them because you’re of European stock (think about it) doesn’t mean that people of other stock won’t buy them. And even Europeans like things YOU don’t like. Until you get past this “It’s all me” mindset, you simply won’t understand others.

        • 0 avatar
          Big Al From 'Murica

          I don’t know. We often scoff at full sized truck buyers not buying their rig for utility…but who buys a CUV to haul mulch in. They are purchased to haul kids to little league and you can’t do that in a 2 door trucklet which it would likely have to be to have a usable bed.

          • 0 avatar
            Vulpine

            Stereotypes are bad, B.A.A, you should know that. I personally own one such CUV and previously owned a Jeep Wrangler SUV. Guess what? I don’t haul kids to little league. In fact, just this past weekend I carried a bed full of landscaping materials from Home Depot in my 20-year-old “trucklet” Ford Ranger where, before I inherited it, would carry the same materials inside the Wrangler (where it quickly became VERY aromatic.)

            And that is my point: People who want to carry things OTHER than kids simply don’t want the stink of their landscaping, trash and who knows what else inside an enclosed cabin but they simply have no choice outside of pickups that are simply too large to comfortably handle their daily driving. They want something smaller and easier to maneuver that can still offer reasonable fuel mileage (getting rid of that blocky nose would help). A 2-2/2 door “trucklet” with a four-foot-plus bed would be ideal for those people who are stuck driving enclosed-body vehicles that don’t quite meet their needs.

      • 0 avatar
        RobertRyan

        @newenthusiast
        Even Globally it is a fairly tiny market.

        • 0 avatar
          Lou_BC

          Even globally, small trucks have grown in size. The global Colorado isn’t much different than the USA one. The Ford Ranger will be very similar to the USA one.
          As Robert Ryan has pointed out, even globally, tiny trucks are a small market.

          • 0 avatar
            Vulpine

            I suggest a little research, Lou; the Global Colorado is about the same size as the older American Colorado, not the newer, upsized version… at least for now. The global Ranger, too, is a bit smaller and is reportedly being upsized for the American market in the same way the Colorado was.

            My question is: Why did GM waste money when they could have just brought the global version in at almost no extra cost outside of safety gear? Why would Ford waste money when they can bring the global Ranger in at minimal extra cost? Why waste money completely redesigning a model that is doing so well in the rest of the world? If you want to cut costs (and Ford is expressly trying to offer a global package of models) you don’t build a completely different model for ONE market!

          • 0 avatar
            Lou_BC

            Vulpine – The USA Colorado shares the same platform as the global truck. The changes made were mostly around appearance and safety rules.
            A lack of homogenization of safety and emissions rules affect what they can or cannot bring into the USA. Another point is appearances. Western truck buyers prefer a certain look.

            If GM, Ford or anyone could sell the Global variant without any changes, they would do it.

            The USA and Canadian market are similar enough and big enough that companies can build products specifically for this market.

            That is why “we” have the F-Series, Ram, Silverado, Sierra, Titan, Titan XD, and Tundra. They make their respective companies money and that is what the majority will buy.

            Here is a list of the best selling vehicles of all time. Ford F Series and Model T as well as the Chevy Impala were never sold globally but still are in the Top 10.

            Car Sales (millions)
            1. Toyota Corolla 37.5
            2. Ford F-series 35
            3. Volkswagen Golf 27.5
            4. Volkswagen Beetle 23.5
            5. Ford Escort (UK) 20
            6. Honda Civic 18.5
            7. Honda Accord 17.5
            8. Ford Model T 16.5
            9. Volkswagen Passat 15.5
            10. Chevrolet Impala 14

          • 0 avatar
            Vulpine

            @Lou: It seems somebody’s memory about the lead-up to the American Colorado is faulty as the global model was based on an Isuzu platform which is NOT the platform the American Colorado rides. They look similar, but the global model was about the same size as the mid-00s model, not the current one.

            Now, that might have changed since then, but I haven’t heard of it doing so.

          • 0 avatar
            RobertRyan

            @Lou_BC
            They also beef it up to take heavier payloads. That is why the “. Midsizers” here are are slightly heavier than a 2.7 F150 Ecoboost

          • 0 avatar
            RobertRyan

            @Lou_BC
            My shot of a series 2 version of the Colorado, they have certainly improved it
            http://i280.photobucket.com/albums/kk200/RobertRyan4/image_zpsrpqwzecw.jpeg

          • 0 avatar
            Vulpine

            Notice how that one is not much larger than any of the cars around it. Can’t say that for the pickups now available in the States.

          • 0 avatar
            RobertRyan

            @Vulpine
            There appears to be a mindset in the US, that Commercial Vehicles/Pickups are ” smaller” outside the US In many cases they are larger.
            Global Colorado is the same as the US one. Ford Ranger Wildtrack weighs more than a 2.7 F150
            Europeans use Cab Chassis variants of Vans as “Pickup Trucks” a Mercedes Benz Cab Chassis is not small
            I posted this in my post to Lou.
            http://i280.photobucket.com/albums/kk200/RobertRyan4/image_zpsrpqwzecw.jpeg
            Would tend to argue about the your broadest range of lifestyles in the world… try Europe, you have 500 Million, not 310 million and many languages and lifestyles

          • 0 avatar
            EBFlex

            “Here is a list of the best selling vehicles of all time. Ford F Series……”

            The Ford F-Series is not a vehicle.

          • 0 avatar
            Big Al From 'Murica

            The F Series is now more or less the same vehicle with different suspension and powertrain options. They share the same cab, interior, etc. Should we break out all vehicles sold by powertrain and suspension options?

          • 0 avatar
            EBFlex

            Yes. Thats exactly what every other manufacturer does.

            But please, show me where the build and price tool is for the Ford F-Series. I’s like to build one.

  • avatar
    zip89123

    If I didn’t pay my bills I’d be rich too.

    • 0 avatar
      Whittaker

      Bingo.
      Its a great business plan if you can swing it.
      Privatize profits. Socialize losses.

      • 0 avatar
        bd2

        That was Wall Street.

        And the govt. had the chance to recoup more of its investment if they held on to their shares for a better price down the road.

        • 0 avatar
          Big Al From 'Murica

          “The government had a better chance to recoup a little bit more of my money that was taken from me and given to a private entity had they held on to it for a better price down the road”

          There, fixed it for you. The US Government is not a brokerage house.

        • 0 avatar
          Big Al From 'Murica

          So perhaps we should have elected Mitt Romney since he has experience running Hedge Funds and the like if this is how the government is to function. Maybe Trump is a good pick after all.

  • avatar
    RobertRyan

    ” Much of the gain comes from improved European sales”
    Yes Fiat is rapidly catching up with Ford in Europe. Not much of a difference.
    GM does not exist anymore.
    Renault and PSA are the main challengers to VW in Europe

  • avatar
    John Franklin Mason

    Next time President Trump brags about how well General Motors is doing under his administration and how many jobs he created or saved at GM, please, someone remind him: it’s “ObamaMotors.”

  • avatar
    EBFlex

    And this is where Big Al’s business strategy of “profits now, recalls later” is coming to bite Ford. Lowering quality as a way to boost profits will only hurt in the long run.

  • avatar
    Lorenzo

    Now we know what the Great Sergio meant about forgetting a merger and attending to the business. It’s about time he worked to increase the value of the company to make it attractive to merger/buyer candidates. He should have thought of that earlier.

    It’s a little funny that profits went up after dropping the Dart and Chrysler 200. FCA must have been putting all of its margin on the hood – and then some – to sell those models. Once the stream of those models stopped arriving at dealers’ lots, they could order more Jeeps and SUVs.

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