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Ford Has '87 Net of $4.6 Billion; Tops GM Again

February 19, 1988|From Reuters

DEARBORN, Mich. — Ford Motor said Thursday that its fourth-quarter profit rose 19% to $932 million, bringing its full-year earnings to a record-high $4.6 billion and besting General Motors for the second year running.

Fourth-quarter earnings, however, fell below industry analysts' expectations because of high expenses associated with Ford's consumer incentive programs. Its quarterly earnings also were weighed down by the start-up costs of a Ford venture with Volkswagen in Latin America.

Ford stock, which fell $2.25 a share to $42.25, was the third-most active stock on the New York Stock Exchange, apparently because the company's earnings per share--while up from last year--were less than what analysts had anticipated. "The low number on the street was $2.07 and Ford reported $1.87," a trader said.

Investors also were worried that Ford's rising inventory of unsold cars suggested that even the leanest firms in the industry may have a more difficult year in 1988 as consumers cut back on big-ticket items.

Ford's fourth-quarter sales climbed to $18.75 billion from $16.26 billion, while annual worldwide revenue rose 14% to $71.6 billion.

Increased Market Share

"Their products are very well received, and they are strong on a worldwide basis," said John Hammond, an analyst with J. D. Power & Associates. "It was an absolutely solid performance."

In 1987, Ford increased its U.S. market share by two full points to 20.2%, compared to GM's 34.7% share. Although Ford is slowly narrowing the gap, it was forced last year to match the incentives offered by its competitors, said Ron Glantz, an analyst with Montgomery Securities.

While the competitive incentives hurt Ford's earnings, the car maker ended the year with more than $10 billion in cash and marketable securities, Glantz said.

"Ford could triple its dividend and still have a cash flow and better balance sheet than General Motors Corp.," he said.

Ford said it would make record profit-sharing payments to its eligible U.S. employees but did not disclose the amount.

GM last week reported fourth-quarter earnings of $836 million and annual profit of $3.5 billion. The nation's biggest corporation, which has been undergoing a painful reorganization, said it was not doing well enough to make profit sharing payments to its workers this year.

In its report, Ford said it earned $1.18 billion outside the United States last year, a sharp rise from $350 million in 1986. Ford said that, while its profit rose in Europe and Asia, helped by the dollar's weakness, poor economic conditions in Latin America hurt the company.

More 'Iffy' in 1988

Analyst Hammond praised Ford's overall 1987 results, but said he was concerned that its inventory of unsold cars was starting to grow--and that might mean more expensive incentive programs.

"The beginning of 1988 looks a little more iffy than 1987," Hammond said, but added that he was far from pessimistic.

Ford's annual profit brought earnings for the Big Three auto makers to a record $9.5 billion in 1987, compared to $7.6 billion the year before.

Among Ford's subsidiaries, the credit unit posted a record $679-million profit last year, up from $611 million the year before.

Ford said earnings at its First Nationwide savings and loan subsidiary fell sharply to $63 million in 1987 from $102 million, reflecting the costs of its expansion program and squeezed profit margins.

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