October 19, 2004
Lying to Your Face
There are innumerable examples of how things are said that seem to say one thing, but actually say something totally different. I am sure that it is assumed that people just don't see the discrepancies. I would like to point to an article in today's NY Times that does just that - Ford Posts $266 Million Profit in Third Quarter.
The article announces that Ford has posted $266 million in profits for the third quarter. That piece is accurate, what is woven in is where those profits came from, and how they are categorized.
Ford is purportedly an automotive company, and the basic assumption is that sales of automobiles accounted for the profit - guess again. While their 3rd quarter revenue increased by $2.3 Billion, it was due to the financial side of Ford - not to auto sales:
"Our results show continued strong performance in financial services and continuing improvement in North American revenue, even though the market remains difficult,'' Leclair said.
Actually, Ford LOST $609 million on auto sales. This means that the "financial services" not only covered the loss but earned Ford a significant profit (that would be a minimum of $875 million in one quarter alone). This figure excluded another $64 million in special items. Ford's earnings for the first 9 months $3.38 billion.
The other convolution is that Ford's financial area is an automotive earnings:
Don Leclair, Ford's chief financial officer, said the company remained on track to deliver a 2004 milestone of $1 billion in automotive pretax profits, excluding special items.
In other words, they are counting their financial services into their pretax auto sales earnings.
Ford is not alone in what is floating their boat ("financial services):
last week for General Motors Corp., the world's largest automaker, where financial services accounted for the bulk of its $440 million third-quarter profit.
Lest one think that the financial services are tied to car sales, please recall that car sales are down and dropping. These are "other" credit operations that are being counted on the "automotive" side of the ledger. I am no account, but this looks like creative bookkeeping to me. And if GM and Ford are doing, my guess is they all are so it is the industry standard.
So what's the big deal one might ask? The big deal is that people read the headlines and think the economy must be doing great because Ford (and GM) are posting big profits. In fact Ford is shooting for $1 billion in profits this year. This is clearly NOT what the profits reflect. Further, one would think that the auto dealers are doing great and stimulating the economy (hiring lots of folks to grow their production). Also NOT true.
Credit is profit for those lending it but represents cash deficits for those receiving it. Obviously people are needing and using credit more because they don't have cash. Therefore, great earnings for the corps do not reflect a rosy economic up turn for the population. For example, GM's $440 million is not helping workers at all as they cut 12,000 jobs in Europe.
Nor is the report that US is set to Lose More Than 400,000 Jobs This Year.
Posted by rowan at October 19, 2004 11:47 AM | TrackBack | [eMail this article!] |I have been on this economic kick lately, it seems that is something most everybody relates to, so take 400,000 jobs, calulate each job @ $18,000.00 a year...that is a lot of money taken out of the economy.
Posted by: Bill Whitlatch at October 19, 2004 5:40 PMBoth Ford and GM have "incentive" style credit cards that charge exhorbitant interest rates (my old GM card was at 21.9% and I had excellent credit back then), but seem like a good deal if you pay off your balance every month.
You see, they promise this "auto" account when you use their cards, whereby you earn $$ toward a car. I had "earned" about $1,300 when I finally cancelled my card, which by the way had a tricky little way of charging interest that mainly guaranteed that I paid some every month despite the fact I paid it on a timely basis. Sometimes it would be a minute amount because they would tell me that it didn't "process" until 2-3 days late (even though I would mail it with plenty of time).
But the real kicker is, that when you go to collect on this money that you have earned by buying tons of stuff with their blasted card and paying them their ridiculous interest rate here and there when you didn't pay the card down to a zero balance, is that it is next to impossible to cash in on the incentives. When I tried to I found out that you basically had to buy a brand-new car, without any rebate/sale/deal of any kind attached to it. It doesn't take a lot of miles (or months on the lot) to be considered "used," so the opportunities to use the dollars were narrowed considerably. You cannot transfer the dollars to anyone else, and your name has to be on the title of the car that you buy, you can't even give the dollars to a spouse. There were untold #'s of caveats.
So, although twice I tried to cash in, I never could. Then I cancelled the card. The incentives are, in my mind a scam, unless you are used to paying full-price for a brand-spanking new car. They are just like any other financial institution, I guess, users of other people's money.
Posted by: Pamela at October 19, 2004 6:14 PMAlong The Lines of Profit Mongering:
It said on NPR the other morning that United Health Care, about the biggest health care provider in the nation, showed a 47% profit for the last fiscal quarter.
It is impossible for most to survive in this discrepancy.
Posted by: goesh at October 20, 2004 4:10 AM