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GM Profits Top Toyota, Ford Tops Everyone

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On: Thu, Nov 11, 2010 at 11:47AM | By: John Welch


GM Profits Top Toyota, Ford Tops Everyone

In a storied turn around the likes of which no pessimistic auto scribe was able to predict, the US auto industry has reversed its fortunes in a short two year span. We aren't out of our global economic anemia just yet, but the car market is already bouncing back in a big way. Global sales may go as high as 70 million vehicles this year, and because of smaller work forces, factory closings and fewer actual brands, automakers have positioned themselves to reap higher profits as the world revives its taste for cars.

Not that they aren't working hard for that money. GM has improved its products across the board, Honda is kicking relative ass on the strength of brand loyalty, VW continues its steady march toward world domination and Ford simply shalacks them all! Here are some hard numbers for you: In the first three quarters of 2010 GM has turned a profit of $4.77 billion. Toyota has only managed $4.46 billion in the same nine month period, while VW claims $4.9 billion. Honda is second on the list with $5.34 billion in profits before September 30th, and Ford demolishes them all with $6.37 billion; more than doubling its profit for the entire 2009 calendar year. The Ford Fiesta and Super Duty trucks are raking in the dough, and now Alan Mullay is enjoying the praise and recognition he so rightly deserves. What happened Toyota? Recalls got you down?

“They're (US Automakers) improving their top line and reducing costs, and that flows to the bottom line,” said Alan Baum, principal of Baum & Associates, an industry consultant in West Bloomfield, Michigan. “Toyota is one of the pack now. They are not the go-to auto company that somebody says ‘I want a reliable and safe vehicle, I'll buy a Toyota.' They've got a variety of problems.”

“Toyota has been a cash cow over decades,” Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan, said yesterday in a telephone interview. “They are now experiencing some of the issues that General Motors was experiencing. They grew too fast, have too many products, and they have overcapacity.”

“I'm a believer in the auto cycle,” said Alan Tarver, a fund manager with Frost Investment Advisors in San Antonio, Texas, which holds shares in Toyota and Volkswagen. You've been through “the bottom, and you're coming out of it. Sales units are stronger, and everyone's nudging up their production assumptions.”

GM's corporate outlook is cautious. They are introducing several new models over the next few months, higher quality models that go hand in hand with higher production costs. While GM will have positive earnings before interest and taxes in the fourth quarter, they will be “significantly lower” than the run rate in the first three quarters of the year, CEO Dan Akerson said today on a conference call. Tooling up to produce the new Cruze as well as the complicated Volt will negatively affect earnings at the end of this year; the sales of these new models should bolster the profit report come the third quarter of 2011.


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