GM's Profits Blow Ford Away, Partly Due to Old Product Line
Krebs, Michelle, The Washington Times (Washington, DC)
General Motors Corp. and Ford Motor Co. recently announced earnings for the fourth quarter and the full year of 1995, and what a contrast.
Selling mostly old products at rock bottom prices, GM earned a record $6.9 billion for 1995, a 40 percent increase from 1994. In the fourth quarter alone, GM earned $1.9 billion, a 19 percent rise from the previous fourth quarter. The higher earnings also came on lower overall vehicle sales.
Meanwhile, across town, Ford saw its earnings go south. For the year, Ford earned $4.1 billion, down 22 percent from 1994's record $5.3 billion. Worse, in the fourth quarter, earnings plummeted 58 percent to $660 million from 1994's $1.6 billion.
Ford Chairman Alex Trotman said second-half earnings were affected by lower U.S. production volume and the automaker's unprecedented number of major product launches, including the new Ford Taurus/Mercury Sable, Ford F-series pickup, and the new Ford Fiesta and Ford Galaxy minivan in Europe. Mr. Trotman has said no year-over-year improvement in earnings would occur until the second half of this year, when the Taurus/Sable, F-series and the redesigned Ford Escort/Mercury Tracer, which combined, make up 40 percent of Ford's production, are fully launched.
"Indeed, GM is milking old products and old engines, and that's showing up in its financial results," said Steve Girsky, auto analyst with Morgan Stanley. "Meantime, Ford is spending heavily on new product, and it is costing them."
But, warns Mr. Girsky, no automaker can milk the same product forever. And while GM's product spending goes up substantially over the next few years, Ford's will decline somewhat. So the tables may well turn.
Beginning this fall, GM will replace its entire midsize car line with new models, which include the Pontiac Grand Prix, Oldsmobile Intrigue, Chevrolet Malibu and Buick Regal. A new line of front-wheel-drive minivans go on sale in the fall to replace the Pontiac Trans Sport, Chevrolet Lumina APV and Oldsmobile Silhouette. Also this fall, Cadillac introduces the Opel-based, entry-luxury Catera, and Buick debuts a new Park Avenue.
That's not to say Ford's future product plan is empty by any means. …