Will Strong U.S. Sales Lead To Big Detroit Three Profits?
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DETROIT (WWJ) – Expect to see some big numbers as the three domestic car companies begin reporting their earnings figures this week.
“Everybody is running flat-out to make cars, and particularly pickup trucks,” says Bill Visnic, an analyst with Edmunds.com.
Visnic says not only are industry sales up in the first quarter, but car companies are selling a lot more trucks—pickups and SUV’s—which tend to have higher profit margins.
“The market has rebounded in a remarkable way for pickups, and really all three of the car companies can’t make enough pickups,” said Visnic.
Ford will be the first of the “Detroit three” to report, on Wednesday. It earned $1.4 billion, or 35 cents a share in the first quarter of 2013. The analyst consensus for this year is 38 cents a share, which would mean profits of over $2 billion.
Chrysler and GM report their earnings next week. Chrysler on Monday, GM on Thursday.
While Chrysler’s recovery is behind the other two companies, it is now back to profitability, and is expected to improve on the $473 million it earned in the first three months of 2012.
General Motors earned a $1 billion profit in the first quarter last year. Those earnings were heavily dragged down by problems in Europe.
For this year’s earnings, analysts have some concern about a slowdown in GM production here in North America, as it gears up for a number of new products.
All three companies are dealing with heavy losses in Europe, as well as the costs of adding new models to their European portfolios as they attempt to reach break-even status by mid decade.
Asia remains a bright point, but is slowing.
The one area of the world that is driving the profitability, North America. Visnic points out that this is a part of the world where the companies were awash in red ink just a few years ago.
“The North American business lagged the other regions of the world. Now, the engine, really for the recovery for all three of the Detroit carmakers has been North America, and particularly the United States.”
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