Auto blog

Ford Q1 profits dragged down by warranty costs

General Motors isn't the only Detroit automaker posting falling profits in the first quarter. Ford just released its Q1 2014 financial data, and it reported a net income of $989 million, down $622 million from Q1 2013. The drop is partially blamed on higher warranty and recall expenses than the company had anticipated.
Financially, Ford suffered a rough quarter almost across the board. Its pre-tax profit of $1.4 billion was also down $765 million from a year ago. Things were even worse in the North American market where operating profit fell significantly to $1.5 billion, down from $2.392 billion in Q1 2013. However, its global revenue ticked up slightly to $35.9 billion, from $35.6 billion in this period in 2013.
Ford admitted that it spent about $900 million on expenses that it hadn't planned for during this quarter. According to Reuters, the company paid about $400 million in additional warranty and recall costs in North America. The automaker didn't explain why the costs were so much higher than expected. However, in the last three months, Ford has had several recalls, including on the 2001-2004 Escape for rust, Explorer for its steering, Edge for its fuel line and others.

Detroit Three autoworkers could get huge bonuses

For a long time, being a line worker for one of the Detroit Three has meant living with an uncertain future. With the health of American automakers on the rise, though, things are also starting to look up for the men and women building the cars. The latest sign that things aren't bad? Big profit-sharing checks.
According to The Detroit News, Ford, General Motors and Chrysler could end up paying over $800 million to 130,000 workers as part of a profit-sharing plan. According to The News, the economic impact of these profits in Michigan alone could exceed $400 million, besting the NFL's Super Bowl, MLB's All-Star Game and the NHL's Winter Classic for their economic impact.
This is the third straight year the Detroit Three have issued profit-sharing checks to UAW employees, and for many workers, the checks are as close as they'll get to a raise, due to the most recent contract between the union and the manufacturers. On average, employees at GM and Ford receive $1 for every $1 million in North American (not just the US) pre-tax profits. Chrysler, meanwhile, gets a similar deal, although the Auburn Hills-based company calculates profit sharing using 85 percent of the brand's global profits.

For EV drivers, realities may dampen the electric elation

The Atlantic, a decades-old monthly journal well-regarded for its intelligent essays on international news, American politics and cultural happenings, recently turned its attention to the car world. A piece that ran in The Atlantic in October examined the excesses of the GMC Hummer EV for compromising safety. And now in its latest edition, the magazine ran a compelling story about the challenges of driving an electric vehicle and how those experiences “mythologize the car as the great equalizer.” Titled “The Inconvenient Truth About Electric Vehicles,” the story addresses the economics of EVs, the stresses related to range anxiety, the social effects of owning an electric car — as in, affording one — and the overarching need for places to recharge that car. Basically, author Andrew Moseman says that EV life isn't so rosy: “On the eve of the long-promised electric-vehicle revolution, the myth is due for an update. Americans who take the plunge and buy their first EV will find a lot to love Â… they may also find that electric-vehicle ownership upends notions about driving, cost, and freedom, including how much car your money can buy. "No one spends an extra $5,000 to get a bigger gas tank in a Honda Civic, but with an EV, economic status is suddenly more connected to how much of the world you get to see — and how stressed out or annoyed youÂ’ll feel along the way.” Moseman charts how a basic Ford F-150 Lightning electric truck might start at $55,000, but an extended-range battery, which stretches the distance on a charge from 230 miles to 320, “raises the cost to at least $80,000. The trend holds true with all-electric brands such as Tesla, Rivian, and Lucid, and for many electric offerings from legacy automakers. The bigger battery option can add a four- or five-figure bump to an already accelerating sticker price.” As for the charging issue, the author details his anxiety driving a Telsa in Death Valley, with no charging stations in sight. “For those who never leave the comfort of the city, these concerns sound negligible," he says. "But so many of us want our cars to do everything, go everywhere, ferry us to the boundless life we imagine (or the one weÂ’re promised in car commercials),” he writes. His conclusions may raise some hackles among those of us who value automotive independence — not to mention fun — over practicalities.