Ford's record earnings are the reward for years of streamlining
Last year, the Ford Motor Company sold more cars and trucks than archrival Chevrolet - the first non-strike year that has happened since 1957 - and made more money than General Motors and Chrysler combined. For the year, the automaker's earnings jumped 41 percent, to $4.6 billion, the highest annual earnings for any company in the history of the auto industry. It was the second straight year Ford outearned the General Motors Corporation, and it will mean record profit-sharing checks of approximately $3,700 for each Ford worker next month. GM workers will miss profit sharing for the second year in a row, because earnings from its US automotive operations did not meet a pre-set ``trigger point.''Skip to next paragraph
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Sales incentive programs late last year kept Ford's earnings for the fourth quarter below analysts' expectations, and the stock fell $2.25 a share after the earnings announcement on Thursday. Still, the quarterly earnings also represented a record, the company said.
Meanwhile, Ford is busy boosting its market share in the United States. In the 1987 model year, it got 22.1 percent of the car market, up 2.3 percent from 1986.
Normally a carmaker hopes to increase its share by one- or two-tenths of a point. Ford's truck share was 28.5 percent, up three-tenths of a point. In 1987 it had the world's best-selling cars with the Escort and Taurus, while the Ford F-series truck was the best-selling vehicle, car or truck.
Ford's profits in recent years have fattened its bank account, which has been used to help it buy up companies, including a majority share of Hertz; Aston Martin Lagonda and AC Cars, of Britain; and financial-service institutions, such as California's First Nationwide Bank, the seventh-largest savings-and-loan in the US.
So is Ford becoming a self-indulgent auto giant, too groggy over its achievements of the last few years to realize the dangers ahead - rising competition and an oversupply of cars? So far, this doesn't appear to be the case.
``I think Ford recognized that it is unlikely it would ever get back to its former levels of domestic production and market penetration,'' says John Schnapp, an analyst with Temple, Barker, & Sloane Inc., a Lexington, Mass., consulting firm. Consequently, it shrank its production capacity as well as its overall corporate head count.
It also made a massive effort with its suppliers to increase their efficiency and quality. Thus, Ford enjoys a better quality image than its domestic competition, despite some aggravating problems in the past which led to widespread publicity and recalls.
Ford learned its lesson in the recession of the early 1980s, when it lost about $3 billion and, to stay alive, had to drastically cut costs. So far the company has reduced its North American overhead by $5 billion and hopes to lop off another $5 billion over the next five years. It has closed plants, laid off workers, streamlined the organization, and tried to boost the efficiency and morale of its remaining work force.