DETROIT’S BIG 3 AUTOMAKERS ARE SENDING MIXED SIGNALS
GM has ramped up production, but Ford is warning of cuts
After a long boom since the recession, the auto industry is sending mixed signals.
Earnings reports this week should shed more light on its future, with some automakers appearing to be healthy and others slowing down.
For instance, Ford Motor is idling four assembly plants for two weeks in Louisville and taking one week off at each of two plants in Mexico and a week off in Kansas City, Mo., where workers produce the F-150, the highly profitable Clydesdale of Ford’s lineup. Yet at the same time, General Motors is running so much overtime at its Flint Truck plant, where the Chevrolet Silverado and GMC Sierra 1500s are assembled, it has been hiring temporary workers to give the regular crew a two-day weekend occasionally.
“They’ve told us we’re scheduled for 13 Saturdays between January and Easter of next year,” said Tim Shoup, who works in paint repair at Flint Truck.
Tuesday, General Motors and Fiat Chrysler report third-quarter earnings. Ford follows Thursday. The numbers will provide important clues as to whether the U.S. market is softening or merely settling into a healthy plateau. But there are compelling reasons to believe automakers and suppliers can easily manage any potential down cycle much better than
they have in the past. Among them:
The broader economy is growing slowly but steadily.
Nearly 200,000 jobs have been created each month in the U.S. since early 2010, according to the Center for the Budget and Policy Priorities. The government releases the October jobs report on Nov. 4.
A year ago, the industry posted its best months in September, October and November. So, on a year-over-year basis expect some declines in the near future.
The average vehicle on our roads is still more than 11 years old, meaning many will be replaced soon.
The Federal Reserve, even if it hikes rates by a quarter point by year’s end, is committed to keeping the cost of borrowing affordable for the foreseeable future.
Ford has warned that Julythrough-September profits will be the lowest of any quarter this year and down from the $1.9 billion it earned between July and September 2015.
“We’re calling out the risk of lower prices and higher incentives,” CEO Mark Fields told investors and analysts last month. “We’re going to stay very disciplined in matching to demand. Production will be cut.”
In July, GM raised the range of its earnings-per-share guidance by 25 cents. Analysts expect GM will come close to the profit it made in the third quarter of 2015 (average estimate of $1.44 per share vs. actual $1.50 per share in the third quarter of 2015).
Fiat Chrysler actually lost $330 million in last year’s third quarter because of an $842 million charge for future recalls.
It likely will report a profit Tuesday.
Fiat Chrysler is ending production of the Dodge Dart and Chrysler 200 in response to consumers’ drift away from compact and midsize sedans toward crossovers and SUVs. But there is no planned idling of any North American plants, according to spokeswoman Jodi Tinson.