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GM, Ford top forecasts
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April 15, 1999: 1:38 p.m. ET
Automakers benefit from strong sales of cars, light trucks, cost cutting
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NEW YORK (CNNfn) - General Motors Corp. and Ford Motor Co. reported higher first-quarter earnings Thursday that topped forecasts on Wall Street as booming sales in North America helped offset weakness overseas.
Consumers snapped up sport/utility vehicles, minivans, light trucks and cars at a surprisingly strong pace during the quarter, and the robust pace of consumer spending should push sales for all of 1999 close to last year's 15.6 million cars and light trucks, the second-best year on record, industry officials and analysts say.
"Certainly the first quarter was better than anybody expected, but we're still looking for a very good year," Ford Chief Financial Officer John Devine told CNNfn. "The consumer is king right now and we're going to take advantage of that."
While the profits from the nation's two biggest automakers beat analysts' forecasts, investors yawned. Ford (F) fell 1-1/8 to 61-5/8 while General Motors (GM) fell 2-5/16 to 87-7/16 as Wall Street turned lower.
GM said earnings rose 31 percent to a record $2.1 billion, or $3.04 a diluted share, in the quarter, from $1.6 billion, or $2.27 a share, a year earlier.
Sales rose 6 percent to $42.4 billion from $40 billion, a sign that GM has recovered from strikes at two Flint, Mich., parts plants last summer that cost the world's largest automaker $1.2 billion.
While GM came back quickly after the strikes, it faces negotiations for a new contract with the United Auto Workers and other unions later this year. Chief Financial Officer Michael Losh said GM is working with the UAW to avoid a strike but also is preparing in case of one.
"We're making sure we're talking with the UAW and our other unions as well … so that neither side surprises each other and we work things out rather than having them come to some kind of flashpoint," he told CNNfn.
He also told industry analysts in a conference call that GM is cutting back on buying its own stock to build up cash in case of another strike, Reuters news agency reported.
GM's results beat forecasts of $2.89 a share, according to First Call, which tracks earnings estimates. The results and the estimates include 36 cents a share from Delphi Automotive Systems, the parts maker that GM is spinning off as a separate company.
Strong domestic profits helped offset losses in Asia and Latin America, GM said, while it posted higher profits in Europe. Citing robust sales of the Chevrolet Silverado, Oldsmobile Alero, Pontiac Grand Am and GMC Sierra, GM said it delivered 1,158,000 vehicles in the United States, up 5.9 percent from a year earlier.
Its GMAC financing unit also turned in a strong quarter, with profits up 12 percent. One dark spot for GM -- its share of total U.S. vehicle sales slipped to 29 percent in the quarter from 30 percent a year earlier.
Ford, the No. 2 automaker, said operating earnings rose to $1.8 billion, or $1.46 a diluted share, 7 cents above forecasts, from $1.5 billion, or $1.22 a share, a year earlier. The results exclude one-time gains in both periods and don't include Volvo cars, which Ford agreed to buy for $6.45 billion in January. Sales rose 3.6 percent to $37.9 billion from $36.6 billion.
Ford said domestic industry sales rose to a record rate of 16.9 million vehicles in the first quarter, up from an annual rate of 15.3 million units a year earlier.
In North America, Ford earned $1.6 billion from its operations, up 57 percent from a year earlier, as sales of sport/utility vehicles, minivans and other light trucks rose 20 percent while car sales increased 10 percent.
Ford broke even in Europe after earning $230 million there a year ago while losses widened to $165 million from $45 million in South America.
"In South America we're going in the wrong direction," Devine said, adding there's a "long way to go" there, especially in Brazil, the region's largest economy.
Ford and GM both said cost cutting also helped the bottom line. To take advantage of the strong auto market, Ford recently raised output by 10,000 cars and 20,000 trucks. 
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