Detroit Money City: GM Leads the Pack as Ford Profit Sinks
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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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.
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.