No need to beat a dead horse here. Ford (NYSE: F) announced third-quarter results today that have been variously spun as meeting or beating analysts' expectations. But we'll get to the bottom line right here at the top: Ford is losing big money on cars, $673 million before taxes, 11% worse than last year's Q3.
It's not tough to figure out why. Along with GM (NYSE: GM) and DaimlerChrysler (NYSE: DCX), Ford has been engaged in a war of attrition for that most fickle and unpredictable metric, market share. The weapons? Massive giveaways, price cuts, cheap financing, clowns, balloons, hot dogs, dog-shaped balloons made by clowns. You name it; they're slinging it these days. Hey, it's a great way to scare up an 8.6% increase in car sales and turn it into a widening loss. (I wonder whether Netflix (Nasdaq: NFLX), Blockbuster (NYSE: BBI), Wal-Mart (NYSE: WMT), and Amazon.com (Nasdaq: AMZN) are capable of absorbing this lesson in the midst of their own price war.)
Management hopes to avert investor eyes from the deteriorating car results with gems such as, "South America, Asia-Pacific/Africa, and Mazda were all profitable." Of course, that's a little like McDonald's bragging that everything else is going down the tubes, but hey, the Fruit 'n' Yogurt Parfait is busting out -- a completely fictitious scenario, by the way. The truth is that Ford's few profitable car markets are a tiny part of the whole.
So sing the praises of the credit wing for pulling Ford out of the hole and delivering a bottom line of $0.15 per share, exactly at the top end of the seal-baiting guidance "increase" issued a few weeks back. But don't sing too loudly.
The results aren't as robust as investors might like. First off, financial services revenues were actually down 4.6%, and the 38% jump in pre-tax profit was owed to "improved credit loss performance and leasing results." A look at the release shows that the turbo boost came from a 25% drop in depreciation and a 36% drop in provision for losses; in other words, bean counters' tricks.
Does it make sense to lower charges for losses while interest rates rise on an American public already leveraged to the hilt? You want to call a bet based on that assumption a gain? This isn't just the story for Q3, but for the whole year. Some return to profitability.
Even Ford's more public magic trick -- Steve McQueen's return from the dead -- can't help the company these days. I don't say this often, but investors would be better off spending their dough on the product than the stock.
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Seth Jayson drives a Ford truck, but at the time of publication, he had positions in no company mentioned. View his stock holdings and Fool profile here. Fool rules are here.
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