GM CFO cites 3 reasons why it lags behind Ford in profitability

Article by Anita Panait, on November 13, 2012

Chuck Stevens, General Motors' Chief Financial Officer for North America, has outlined three main reasons why the carmaker still lags behind Ford Motor Co. in the North American market: long product cycle, later adoption of global platforms and still high fixed costs. During the carmaker’s third-quarter earnings conference call, a question was raised as to why GM is less profitable than Ford in North America.

There is truth in the question as GM posted only 7.8 percent in pretax profit margin in the region, compared to Ford’s 11.9 percent. Stevens replied that GM has a clear understanding of the gap and knows what it has to do to close it. GM’s CFO cited long product cycle as one the main reasons why the carmaker still lags behind Ford in terms of profitability.

According to Stevens, GM's most profitable vehicle lines are also its oldest. These include full-sized pickups and sports utility vehicles, which according to analysts, return profits of over $10,000 per unit. That helps the newer Ford F series gain an average transaction price of up to $1,000 more than GM’s Chevrolet Silverado. In addressing this reason, GM will go from having "the oldest portfolio in North America to the freshest" over the next two years, according Stevens. GM’s CFO added that new, redesigned or freshened vehicles will account for around 70 percent of GM’s volume in the US.

Stevens also noted that Ford is around two years ahead of GM on adopting global platforms. By employing global platforms, carmakers could drastically reduce cuts engineering and purchasing costs, resulting to higher profits. Stevens disclosed that by 2018, around 90 percent of its worldwide sales volume will be derived vehicles built on around 14 "core" platforms.

This would allow GM’s platform structure to be somewhat on par with those of Ford and Volkswagen Group. As for the third reason, fixed costs, GM has yet to fully trim its cost structure. GM chief executive Dan Akerson, however is accelerating those efforts.  For instance, the carmaker is consolidating outside marketing firms and taking information-technology programs in-house to reduce costs longer term.

Topics: gm, ford, profit

If you liked the article, share on:

Pin It

Comments

Recommended

To the proud owners and owner-to-be of the Porsche 991 Carrera GTS, there's good news for you all. German automobile manufacturer Porsche recently confirmed to the public that the Porsche...
by - March 23, 2017
McLaren diehards, this is the moment that you're all waiting for. The British automaker recently publicized the teaser outline of its new automobile that will hit the streets soon, dubbed...
by - March 23, 2017
PSA seems very confident about conquering the world. The purchase of Opel/Vauxhall for €2.2 billion ($2.3B) from General Motors makes PSA the second largest car company, just behind the Volkswagen...
by - March 23, 2017
Reporting for duty. It’s been a year since the Victoria Police was loaned a new Mercedes-AMG GLE 63 S Coupe. In those 12 months, the coupe served as the law...
by - March 23, 2017
After making its debut at the Paris Motor Show last year as a concept car, the Trezor by Renault managed to bring home the 2016 Concept Car Design Of The...
by - March 23, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries