Ford Profits Plunge

This is huge – and not good, either.

Ford just released its Q3 earnings and while the company is still making money, it is making a lot less money. Pre-tax net earnings are down to $1.4 billion, which sounds solid until you compare them with the previous quarter’s pre-tax net earnings, which were $3 billion.

In plain terms, Ford earned less than half during the third quarter what it earned the previous quarter.

I wrote a few weeks ago (here) about the canary in the coal mine.

Hear that?

He just hit the bottom of the cage, feet up.

There are other indicators, too.

Such as the industry-wide rush to “ride sharing” … which indicates that the industry sees an Event Horizon up ahead. The rim of a financial black hole for them – and us – based on the now-100-year-old model of people for the most part buying a car.

Which – for two reasons – has become less affordable and so less appealing to more and more people, but particularly 20-something Millennials. Who do not have the love for cars that earlier generations had. Who see them as a necessary nuisance at best.

One that’s better rented when necessary.

Part of this being a function of the now-absurd cost of buying.

Sure, monthly payments are kinda-sorta manageable. The trouble is they never end. Six years, seven – eight? – of paying $300 a month gets old.

Especially once the car itself is. Nothing like paying $300 a month on a seven-year-old beater with 100,000 miles that’s starting to cost money for repairs you probably can’t do yourself.

Renting a perpetually new car – a different car to suit any occasion – seems much more appealing.

It is without question more affordable.

Less hassle, too.

When you rent, you don’t have to pay property taxes – because you are not the owner of the thing. Maintenance isn’t your responsibility, either. Insurance? It’s a rental. Folded into the cost of the rental – which is only for as long as you need the thing. If you own a car, you are paying insurance all the time – or at least, as long as you own the thing.

The government – through its cost-no-object regulatory confetti machine – is chiefly to blame for the high cost of new cars, but “consumers” – a loathsome term, like “human resources” – haven’t helped. They have bought into the same cost-no-object paradigm via the cost-hiding regime of debt financing.

And the rest of us (who try to live within or even below our means) are carried along by this financial rip tide.

Large numbers of people want – but most can’t really afford – huge flatscreens, heated leather seats, panorama sunroofs, and gnome sayin’ 20-inch wheels and tires, the works.

So they finance them.

Which the system obliges with near zero interest and long-haul payment plans. But ultimately, someone has to pay for all this stuff.

The well is beginning to run dry.

As a known car journalist, I get lots of mail from lots of people. Ford might be interested in some of this correspondence.

Long-time truck people are skeeved out by the new F-150 pick-up, with its expensive to fix (and relatively fragile) aluminum body. And its tiny (for a big truck) turbocharged six cylinder engines.

These examples of centrifugal bumble-puppies exist solely and only because of the anvil-over-their-heads threat of federal regulation.

Especially (but not exclusively) federal fuel economy (CAFE) regulations.

Pathetically, the F-150’s mileage is only just barely better than steel-bodied/V8-powered pick-ups.

Nonetheless, the idiocy is certain to wax rather than wane unless there is either divine intervention or – possibly a bit more likely – a revolt by buyers, expressed by their opting out.

Ford’s just released Q3 report suggests this is happening in a very big way.

Maybe it’s the pending (s)election and the impending sense of doom that’s prompting people to hold onto their wallets.

Regardless, the fact remains: People – lots of them – are just saying no.

The canary has croaked.

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www.ericpetersautos.com

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One Response to “Ford Profits Plunge”

  1. Jeff T says:

    Eric, the end goal of the social planners is to eliminate privately owned cars, and all cars, eventually. This being what remains of the US, they can’t simply ‘ban’ cars, so it’s a gradual process. Making them less desirable and less necessary, while also making them more and more expensive to buy/own/maintain/insure means fewer will choose to own one. Instead, they will go the route you outlined- renting if/as needed, and using services such as Uber and Lyft to get places. Along with the same lines, our current young generation are currently being trained to rely on public transportation in increasing numbers, rather than cars.

    At 54, I may not see the end of the privately owned car, but my college-aged daughter surely will. When that period ends, personal freedom will take a huge hit in the country, as citizens will no longer have the ability to travel where/when they want, at their chosen pace. I hope I don’t live that long!