Ford vs. GM — Clash of the Titans Continues

Detroit’s divas downshift in Q1; are either worth investors' money?

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Ford vs. GM — Clash of the Titans Continues

The lap times are in for automakers, with April sales and first-quarter earnings in the books. What the numbers show is that the titanic battle between Ford (NYSE:F) and General Motors (NYSE:GM) is getting both slower, and tighter.

Let’s first take a look at what we just learned from their recent earnings reports — and then what to expect going forward.

Looking Back

Earlier this week, both companies recorded a downshift in April sales. Ford saw its total sales decline 5% year-over-year for the month. GM saw an even more abrupt slowdown, as its sales sank 8% YOY. In what came as a bit of a surprise to many industry watchers — including yours truly — there was a decrease in demand for the more fuel-efficient compact and subcompact models.

Another surprise to most was the outstanding showing from that “other” U.S.-automaker, Chrysler. The Fiat SpA-owned (PINK:FIATY) firm posted a 20% surge in its April sales, a boost likely due to big rebates on many of its most popular models.

On the earnings front, both companies showed a remarkable lack of horsepower in the first quarter.

Ford’s Q1 results revealed that net income fell by nearly half compared to a year ago, as a higher tax rate and losses in Europe and Asia represented a substantive amount of drag on the company’s results. Ford did lay down a blistering lap in North America, with operating profit in its North American unit rising 16% to $2.1 billion. Ford’s profit margin in the region now is 11.5% — quite impressive when compared to the industry goal of a 5% North American profit margin.

Overall, Ford earnings came in at $1.4 billion, or 35 cents a share, which is down from $2.55 billion, or 61 cents, a year ago. Revenue also declined, sliding 2% to $32.4 billion. Ford’s outlook for full-year operating profit remained unchanged despite the Q1 showing.

As for GM, the automaker saw its first-quarter profit plunge 69% from a year-ago. The world’s largest automaker reported earnings of $1 billion, down from $3.2 billion a year ago. Of course, that year-ago number was juiced by gains from asset sales in Delphi Automotive LLP and Ally Financial. Yet despite the decline in YOY profits, the Q1 figure did best Wall Street’s expectations. GM earnings fell to 93 cents a share from $1.77 a year ago, a figure that topped analyst forecasts for 85 cents.

Like Ford, GM had a difficult time in Europe and Asia but saw strong sales in North America. GM made $1.7 billion in its North American division, a number that easily bested last year’s metric of $1.3 billion. Although North American sales were strong, they did come in slightly below estimates. As for GM’s North American profit margin, the company saw an improvement to 7%, above the industry goal of 5%, but well below Ford’s 11.5% metric.

As for U.S. vehicle sales in the first quarter, GM saw an increase of 2.7% while Ford’s sales rose 8.5%. Here again we see Chrysler trouncing its competition, as its U.S. sales surged 35.9% in the quarter.

The first-quarter results, along with the April sales data, show that both Ford and GM have put on the brakes since last year. And though both companies are enjoying the rebound in North American sales, both also are suffering the ill effects of a slowdown in Europe and Asia.


Article printed from InvestorPlace Media, http://investorplace.com/2012/05/ford-vs-gm-clash-of-the-titans-continues/.

©2014 InvestorPlace Media, LLC

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