The massive changes needed to Ford's truck factories in order to produce the new F-150 meant that the current F-150, shown, was in short supply last quarter. That hurt Ford's bottom line. Source: Ford Motor Company.
The big news in the world of autos this week, other than yet another chapter in the year's never-ending recall saga, came from Detroit, where Ford (F 2.15%) and General Motors (GM 2.88%) both reported third-quarter earnings that beat Wall Street's estimates.
More news came from Toledo, of all places, where moves by city and state governments to save a Jeep factory might have persuaded Fiat Chrysler (FCAU) to take a different tack with its upcoming all-new Jeep Wrangler.
Let's take a closer look.
General Motors' profits beat Wall Street on good U.S. and China results
GM was the first of the Detroit three to report earnings, and it posted a fine result: The General earned $2.3 billion before taxes in the third quarter, down a bit from its year-ago result but -- at $0.97 a share -- $0.02 ahead of Wall Street's $0.95 per-share prediction.
What worked for GM? Despite all the recalls, despite all the scandals, GM is making very good money in North America. The regional business unit earned $2.45 billion in the quarter, up from $2.2 billion a year ago, as new products like the Chevy Tahoe and Cadillac CTS helped boost GM's profit margin to an impressive 9.5%.
Cadillac's U.S. sales may be down this year, but its average transaction prices are up sharply, thanks to strong new products like the CTS sedan. Source: General Motors Company.
Challenging economic conditions in Brazil and Russia weighed on some of the General's overseas results, but profits from GM's other big market -- China -- were up. There too, GM's profit margin was strong at 9.6%, and GM is investing aggressively in hopes of outperforming the growth of China's overall market.
Ford beat Wall Street too, but the Blue Oval's new truck is costing it big
Ford on Friday reported that it earned a profit of $1.18 billion before taxes in the third quarter, a 55% drop from the $2.59 billion it brought home a year ago. But at $0.24 a share excluding some one-time items, Ford also made enough to beat Wall Street's $0.19 per-share estimate.
Despite beating estimates -- and despite the fact that Ford's results were right in line with the careful guidance it issued just last month -- Ford's stock got clobbered, dropping over 4% in trading on Friday. Investors had hoped for a rosier result after GM's better-than-expected report, but Ford delivered exactly what it had told us to expect.
Preparations for the all-new 2015 Ford F-150 cost Ford big in the third quarter -- but should pay off starting next year. Source: Ford Motor Company.
Ford's near-term outlook isn't rosy, but that's not necessarily all bad news. The company is launching a slew of new products, including a completely redesigned version of the most important and profitable Ford of all, the F-150 pickup. The extensive factory overhaul needed to make the new aluminum-bodied F-150 cost Ford five weeks' worth of production at its Dearborn factory: That's tens of thousands of pickups that Ford dealers didn't have available to sell last quarter.
Meanwhile, Ford's overseas operations are all facing challenges. Rough economic waters in Russia and Latin America made it tough for GM, but they were even tougher for Ford. The company went to the trouble of warning last month that losses in those regions would be greater than expected, and they were. And while Ford's sales have been booming in China, Ford is spending big to build five new factories; those factories will all be up and running within nine months, but right now, they're still soaking up a lot of Ford's Asian profits.
It wasn't all bad news, though. While Ford expects its total pre-tax profits for 2014 to come in at about $6 billion, next year's result should be much higher -- in the $8.5 billion to $9.5 billion range, as those new F-150s and those new Chinese factories start to turn red ink back into black.
A firestorm over the next Jeep Wrangler turns out to be all smoke
Fiat Chrysler CEO Sergio Marchionne set off a firestorm a couple of weeks ago when he suggested that production of the iconic Jeep Wrangler might move from its longtime home in Toledo, Ohio, to another Chrysler plant somewhere in the U.S.
That had tradition-minded Jeep fans upset, but not (just) because of the symbolic importance of Toledo to Jeep's history. The current Jeep Wrangler is a "body on frame" vehicle, built like a pickup truck with a sturdy separate frame as its foundation. That, enthusiasts say, is one of the secrets behind its tremendous off-road prowess -- but it's one that would likely be lost if Jeep production were to move.
The Wrangler has long been the centerpiece of the Jeep brand. A report this week confirmed that Fiat Chrysler isn't likely to mess with that. Source: Fiat Chrysler.
Factories that make "body on frame" vehicles are set up very differently from those that make "unibody" vehicles, a category that includes nearly all cars and crossover SUVs. The factories that Marchionne named as alternatives for the next-generation Wrangler are all unibody plants; that suggested that Jeep might be giving its icon a more car-like structure next time around.
Such a structure would probably make the Wrangler lighter, and improve its fuel economy -- but at the expense of at least some of that all-important off-road ability. Jeep enthusiasts have long feared that Fiat and Chrysler would someday "ruin" the Wrangler, and Marchionne's offhand comments suggested that the moment of ruination might be at hand.
Officially, Fiat Chrysler isn't saying anything except that the next Wrangler will be "the most capable Wrangler ever." But trade publication Automotive News reported this week that the upcoming new Jeep, which is due in 2017, will continue to be a body-on-frame vehicle -- and will, in all likelihood, be built in its longtime home of Toledo.
