Ford’s Earnings Up; GM’s Drop; UAW Is Caught in the Middle

DETROIT — Less than a week before they are scheduled to open national contract talks with the United Auto Workers, General Motors and Ford displayed contrasting financial pictures of themselves Thursday, as Ford reported record second-quarter earnings and struggling GM posted another decline.

The divergent results of GM and Ford in the second quarter indicate just how difficult it may be for the UAW to follow tradition by demanding that both firms agree to the same contract terms this year.

While Ford said it earned a record $1.5 billion, up 39% from last year’s $1.08 billion, GM, suffering through what some industry analysts have described as a sales “free-fall,” posted net income of $980.3 million, down 3.7% from the 1986 level of $1.02 billion. Thus, just as it did for the full year in 1986, Ford once again bested GM on the bottom line despite GM’s much larger size.

During the quarter, Ford said its share of all U.S. car sales, including imports, jumped more than two full percentage points to 20.6%, thanks to a 5% increase in sales of its models in a generally sluggish market. GM reported a 16.9% decline in U.S. car sales for the quarter.

The contrast between Ford and GM was even more stark in the amount of money that they made on basic operations--primarily automobiles. GM, the world’s largest corporation, reported a 28% decline in pretax earnings from operations, while Ford said its operating profit jumped 36.4%. GM’s net income was so much higher than its operating earnings mainly because of a record performance by its finance arm, General Motors Acceptance Corp., which reported earnings of $411.8 million.

Perhaps most embarrassing for GM was that Ford’s income just from U.S. operations--$982 million--was more than GM made worldwide. Outside the United States, Ford earned a record $516 million, up 80% from last year’s $286 million.

Ford’s strong earnings performance during the past two years also has allowed it to build up an enormous cash cushion. At the end of the second quarter, Ford had $9.14 billion in cash and marketable securities on hand; as a result, it has become a darling of Wall Street investment bankers.

GM’s cash on hand at the end of the quarter was $4.63 billion.

Separately, GM on Thursday announced that it is laying off 3,000 workers at four plants. They join 40,000 other GM workers already on indefinite layoff. GM has been reducing its production all year to reflect lower-than-expected sales.

The latest layoffs affect workers at GM plants in Flint, Mich., Oklahoma City, Framingham, Mass., and North Tarrytown, N.Y.

Despite its relatively weak performance during the quarter, GM executives insisted that they were pleased.

“Our relatively strong year-to-year performance . . . demonstrates GM’s growing ability to achieve significant earnings, despite a 14% decline in unit sales,” GM Chairman Roger B. Smith and President F. James McDonald said in a joint statement.