GM, Ford post losses totaling $1.6 billion 'Big Three' facing worst year ever

October 23, 1991|By Amy Harmon | Amy Harmon,Los Angeles Times

DETROIT -- General Motors Corp. and Ford Motor Co., the world's largest auto producers, posted third-quarter losses totaling $1.6 billion yesterday, in what is shaping up to be the worst financial year in U.S. automotive history.

GM, which has not made money since the second quarter of 1990, said that it lost $1.1 billion for the July-to-September period. Ford's fourth consecutive quarterly loss came to $574.4 million.

When Chrysler Corp. reports losses expected to exceed $200 million later this week, "Big Three" losses for the year will total more than $5 billion, putting 1991 well above Detroit's record 1980 loss of $4.5 billion. And industry analysts say the prospects for a dramatic fourth-quarter improvement are slim.

GM and Ford blamed their financial woes chiefly on the U.S. economy, whose painfully slow recovery has kept consumers too insecure in their own financial condition to buy cars. Top executives at both companies said they were confident that the cyclic industry would eventually pick up again. But they did not express much hope for a profitable end of the year.

"There isn't that much we can do other than wait for the economy to improve," said David McCammon, vice president for finance at Ford.

While the losses are massive, both Ford and GM have the TTC resources to weather current difficulties. Although some analysts have speculated about Chrysler's ability to pull through, Chairman Lee A. Iacocca said last week that new products would rescue the ailing company.

Discounts for consumers have squeezed profits for the Big Three automakers; still, rebates are expected to continue. Layoffs are not expected for auto workers, because all three manufacturers say they will increase production at the end of the year in anticipation of a gradual sales recovery.

The third quarter has historically been the weakest for the auto industry, with production reduced as factories close down to retool for the coming model year. But industry analysts say the stalled sales recovery made this year especially brutal.

The anemic sales rate continues to hover at levels 2 million to 3 million vehicles below the annual 15.5 million considered to be the trend mark for the industry. It has driven automakers to offer price discounts averaging about $1,000 per vehicle in an effort to attract customers.

In addition to the pressures of the sluggish economy, analysts say automakers are grappling with structural changes in the domestic auto business that have made it possible to build more cars than people want.

The expansion of U.S. plants by Japanese automakers has made turning a profit in the U.S. market very difficult. Ford lost $197 million in its core U.S. automotive operations in the third quarter of 1991. GM does not break out its North American earnings separately, but a company executive said earlier this year that the nation's No. 1 automaker would not make a profit in North America until 1993.

Analysts say that the Japanese automakers, whose production costs are lower than those of the Big Three, are losing money in the United States, even as they push to increase their collective share of the car market.

Ford posted record profits during the mid-1980s and boasted that it had grown lean enough to survive a recession without losing money. But the results at Ford were especially bad, analysts said yesterday. The company attributed its deterioration the double-whammy of recessions in the United States and England, its two major markets.

GM's third-quarter 1991 loss came on $28.9 billion in revenues, down 6.2 percent from last year. In the same period last year, GM lost $2 billion, but that figure reflected a $2.1 billion accounting charge against earnings to pay for plant closings.

Ford's third-quarter loss compared with a profit of $101.7 million, during the period last year. Third-quarter revenues of $21.1 billion were down 8.3 percent from 1990.

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