Smaller Q1 profits for Detroit’s big three
BY HAITHAM RAZAGUI | 3rd May 2013
Ford’s highest North American first-quarter profit in more than a decade contributed to an overall pre-tax profit of $US2.1 billion ($A2.05 billion) for the first quarter – its 15th consecutive quarter in the black.
But compared with the same period last year, Ford’s figure was down $US147 million (or 6.41 per cent), with the difference described as “more than explained by Europe and South America”.
Across town, General Motors reported first-quarter earnings before interest and taxes (EBIT) of $US1.8 billion, down 18 per cent, with a 12.5 per cent drop in North American EBIT to $US1.4 billion despite global increases in market share and sales volume.
Chrysler Group profit also dropped, with the earnings before interest, taxes depreciation and amortisation (EBITDA) down 24.2 per cent to just shy of $US1.05 billion, partially due to lower vehicle shipments caused by production lulls in preparation for new product launches.
Ford’s North American profit rose 16.9 per cent to a record $US2.4 billion, the highest since at least 2000, when the region became a separate business unit, with an operating margin of 11 per cent compared with the company’s global average of 5.2 per cent.
Total first-quarter Ford sales were up 10.2 per cent to 1,497,000 units and the company made market share gains in both the North America and Asia Pacific Africa regions, with a small pre-tax profit made in the latter but losses in Europe and South America.
The Blue Oval still expects full-year pre-tax profit to equal last year’s result, with margins equal to or lower than last year, but with higher automotive cash flow.
It also made a $US1.8 billion contribution to worldwide funded plans including $US1.2 billion discretionary contributions “in line with Ford’s long-term pension de-risking strategy”.
Ford president and chief executive Alan Mulally said the company’s strong results “provide further proof that our One Ford plan continues to deliver”.
“Our plan remains centred on serving customers in all markets around the world with a full family of vehicles – small, medium and large cars, utilities and trucks – each with the very best quality, fuel efficiency, safety, smart design and value.”
The South American region lost $US218 million compared with the same period last year, when it made a $US54 million pre-tax profit, and sales volume was down 4.2 per cent to 113,000 units.
Ford attributed the loss to unfavourable exchange rates, particularly with Venezuela and Argentina, and expects the region to break even by year’s end, although it says uncertainty in the two markets could adversely affect its ability to break even in the region.
Losses in Europe grew to $US462 million, up from $149 million in the first quarter of 2012, with restructuring costs, higher pension expenses, market conditions and exchange rates among the listed reasons – sales volume was down 8.3 per cent to 341,000 units.
Ford has not revised its forecasted $US2 billion loss in Europe by the end of this year, but has “made progress” on improving cost efficiency with planned job cuts at production facilities in Britain and Belgium, while the seven recently introduced new vehicles are “off to a strong start”.
The Asia Pacific Africa region, which included Australia, made a pre-tax profit of $US6 million compared with a $US95 million loss last year, reflecting “favourable market factors” plus higher royalties and subsidiary profits, although these were “largely offset” by “investments for future growth in the region”.
Sales volume was up almost 30 per cent to 282,000 units, but Ford still expects the region to only break even by the end of this year, with increased volume, market share and revenue to be offset by investment in new products and the building of new production facilities in China and India.
In contrast with Ford, EBIT from GM’s North American division shrank 13.8 per cent to $US1.4 billion, while losses from its European operations were stemmed to the tune of 40 per cent, to $US175 million.
GM chairman and chief executive Dan Akerson attributed the progress in Europe to “strong cost actions and great vehicles like the Opel Adam and Mokka” and the British Vauxhall brand grew faster than that country’s market average.
The South American region went from $US153 million EBIT in the black in the first quarter of 2012 to a $US38 million loss in the same period this year – with the Venezuelan currency devaluation affecting the bottom line. GM’s International Operations EBIT shrank almost five per cent to $US495 million.
Global GM vehicle deliveries increased 4.3 per cent to 2.4 million, with market share increasing from 11.2 to 11.4 per cent.
Chrysler Group attributed its lower profit figure to lower vehicle shipments and higher industrial costs caused by the introduction of models such as the facelifted Jeep Grand Cherokee, refreshed Ram trucks and preparations for the all-new Jeep Cherokee that will soon enter production.
The company anticipates the new products will “position the company for a strong performance in the second half of 2013”.
An eight per cent rise in global vehicle sales to 563,000 units was helped by a 12 per cent increase in US demand, but overall vehicle shipments decreased six per cent to 574,000 due to the aforementioned industrial factors.
International shipments declined due to “continued economic weakness in Europe and import restrictions in Latin America”.
Chrysler Group chairman and chief executive Sergio Marchionne said the company remains on track to achieve its business targets despite the first quarter results being affected by the aggressive launch schedule.
“This quarter underscores the importance of an unwavering commitment to execute flawless vehicle introductions to reach our full potential.
“While the task ahead this year is daunting, we remain committed to our overall targets, including a minimum shipment increase of eight per cent and a modified operating profit of $US3.8 billion.”
