Ford’s Profit Rockets 104.8% in Quarter to Record $1.49 Billion
Ford Motor Co., reaping the rewards of its trend-setting product design and its adherence to stringent cost control measures, said Wednesday that it earned a record $1.49 billion in the first quarter of 1987, more than doubling last year’s pace.
Ford’s profit for the three months were up a startling 104.8% over its 1986 first-quarter earnings of $728.3 million and also broke Ford’s previous quarterly profit record of $1.1 billion set in the second period of last year.
Ford, whose earnings far surpassed most Wall Street forecasts, also left cross-town rival General Motors in its dust during the quarter.
After posting slightly higher annual earnings than GM in 1986 for the first time since 1924, Ford expanded its profit lead over the world’s largest industrial company in the first quarter. With a revenue base only about two-thirds the size of GM’s, Ford earned more than $500 million more than did GM during the three months.
Ford executives and industry analysts alike credited Ford’s performance during the quarter to the company’s focus on the fundamentals of the auto industry--producing cars and trucks customers want while keeping prices and costs in line.
Sparked by a popular lineup that is led by its aerodynamically shaped Ford Taurus and Mercury Sable models, Ford’s U.S. car and truck sales rose a combined 3% during the first quarter, while GM, Chrysler and the Japanese all saw their sales drop.
Other Models Do Well
“It’s amazing, everything seems to be doing well for Ford, it’s not just one model like the Taurus,” said Chris Cedergren, sales analyst with J. D. Power & Associates, an automotive market research firm. “The Taurus is doing very well, but what blows my mind is how well so many other cars, like the Mustang, are doing. It looks like this is just the year of Ford.”
Ford’s sales were also buoyed by the fact that its Japanese competitors have been forced to raise prices by an average of 18% to 20% since the fall of 1985, when the Japanese yen began its rapid appreciation. During the same period, Ford’s prices have risen only 5% to 6%, and Ford executives estimate that their products now are priced an average of roughly $1,000 below comparable Japanese models.
“We are priced substantially under the Japanese, and consumers are starting to recognize that,” said David McCammon, Ford’s controller. “That’s starting to make a difference. We’re starting to have more people than ever before come in (to Ford dealerships) who previously bought imports.”
At the same time, Ford’s share of the U.S. passenger car market, including imports, rose to 20% for the quarter from 18% during the same period last year. With the exception of one period in 1984 during which GM was shut down by a strike, it was Ford’s highest market share since 1979.
Analysts said that Ford’s market share gain seemed to come at the expense of GM, which saw its share drop to 37.5% during the first quarter from 42.2% during the same period last year.
Japanese Share Steady
The share held by the Japanese, meanwhile, including their cars built in the United States, remained unchanged during the quarter.
“What is amazing is that this is the first time we’ve seen Ford gain this much strength at a time when GM has seen its share deteriorate,” noted Cedergren.
With all of its North American assembly plants straining to produce at capacity, Ford said that its after-tax profit from the United States rose to $1.16 billion, up nearly 95% from last year’s $596 million.
