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U.S. Automakers Headed For Record Profits This Year

Aggressive cost cutting that has more than made up for flat sales has put the Big Three automakers on a pace to make more money this year than ever before.

General Motors Corp., Ford Motor Co. and Chrysler Corp. have earned $12 billion through the first nine months, a stunning 25 percent increase over the same period in 1994.

The Big Three posted a record $13.9 billion in profits in 1994. They will pass that record by $900 million if they at least match last year’s fourth-quarter performance. They’ve found the profit gains this year despite merely matching last year’s sales figures of 15.4 million vehicles.

“This industry has learned to do more with less,” said Scott Merlis, president of Merlis Automotive International Inc.

David Littmann, senior economist for Comerica Bank, said automakers have managed to cut costs by shipping more work to low-cost suppliers and by leaning on the suppliers to cut their costs.

Automakers have simultaneously shrunk their own operations.

The Big Three also have gained because sales of light trucks, which are more profitable than cars, continue to rise.

Leading the surge is Ford, which needs just $200 million in fourthquarter profits to surpass its record earnings of $5.3 billion in 1994. The automaker credits $2.3 billion in cost cutting this year for its gains.

Chrysler needs $1.8 billion in fourth-quarter profits to surpass its annual record of $3.7 billion in 1994.

GM is about $1.9 billion shy of its record $6.9 billion profit in 1995.

Tags: business