Detroit is still the heart of the American automotive world and even though FCA is officially listed as registered in Amsterdam its operations are mostly out of the Auburn Hills area just outside of Detroit. Ford is certainly a fixture in the Detroit area and couldn’t deny the area if they wanted to. Recent reporting of their financial positions of both companies has caused certain changes to take place within each company going forward. These reports have a mixed message that’s been delivered based upon that part of the company that’s being discussed. Let me explain.
FCA has officially reported an increase in earnings of $1.92 billion for the 2016 model year which helps them continue their climb out of the debt hole they were in when Fiat bought out Chrysler. Ford on the other hand has reported a net income of $4.6 billion which is 38 percent lower than the previous year. This decline due to changes in the pension plans and actually is a result that is $200 million more than was expected and turned out to be the second best year that Ford has had since 2000 making it a mixed bag of positive and negative accounting.
Both of these companies have benefited from the fact that we love to buy large vehicles in the US. The SUVs, crossovers and pickups made by FCA and Ford have been some of the highest selling vehicles in the market and with SUVs selling better than sedans in 2016, this trend is expected to continue for the next few years. The challenge for both companies isn’t in this area of the market; it has to do with the small cars that are produced. These smaller and less profitable vehicles offer a challenge of trying to stop the bleeding when it comes to the cost to build each one.
While FCA has already announced they are stopping all production of the Chrysler 200 and Dodge Dart, Ford has taken a different approach and is planning to move all small car production to Mexico. While that move has been met with the disapproval of the new Presidential Administration, Ford plans to continue forward with the change to their production. Both automakers have seen global profitability and have enjoyed success in China despite being late to the market with some of their vehicles in that area of the world.
The expectation for 2017 and beyond is there will be some decline in the overall sales of vehicles. Similar to the market prior to the global tumbling of 2008, the automotive market won’t continue to rise, but will eventually begin to fall again. Thankfully, all automakers seem to be prepared for this possibility, as for these two global giants, the increase in revenue has helped FCA invest heavily in the SUV and pickup truck brands to show significant changes that we’ll see in the near future and Ford continues to strengthen its position in these vehicle categories as well.