GM, Ford face declining fortunes

Hyderabad: The big two carmakers in the US are facing declining fortunes due to rising competition and escalating fuel costs. While GM is almost on the verge of asking for bankruptcy protection, Ford Motor Co has declared a loss in the third quarter of the current fiscal as sales of high-margin sports utility vehicles are declining and its key unit in the US has entered the red.

Ford Motor has reported a net loss of $284 million, in the quarter compared with a profit of $266 million, a year earlier. Excluding special charges, the company lost $191 million, or 10 cents a share.

Ford has also cut its fourth-quarter production target by 2.4 per cent to 810,000 vehicles, and expects full-year profit to be at the lower end of its forecast range of $1 to $1.25 per share.

Sales of Ford vehicles in the US are down 1.3 per cent so far this year despite a massive discount programme that helped clear the inventory of unsold vehicles.

Both Ford Motor's and General Motors' margins have been under pressure in the US market due to increasing competition and a dramatic slowdown in sales of the once profitable mid-size and large, fuel guzzling SUVs due to high US gasoline prices.

Both the companies' credit ratings were reduced to high-yield or "junk" status this year.

Ford's luxury brands, grouped under the Premier Automotive Group, narrowed its pretax loss to $108 million from $171 million a year earlier.

Despite the third-quarter net loss, Ford remains in the black for the year as a whole. GM's troubles are more serious and it lost about $3.8 billion through the first nine months of the year. The company is almost on the verge of asking for bankruptcy protection and recently announced a deal with the United Auto Workers' union to slash its multibillion-dollar health-care costs. It is also looking at selling a stake in its finance arm.

Shareholders are pressuring Ford to reveal its plan for cutting costs and capacity in its North America division. The company plans to announce a restructuring plan by next month.

Will the decline in the financial fortunes of the "big two" affect their India operations?