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USA: GM & Ford ignore small cars, post big profits

General Motors and Ford have managed to post big profits by focussing production on high-margin models, instead of the low-priced vehicles.

General Motors and Ford have announced their financial results for Q1 2021. Both American car companies managed to post net incomes upwards of US$ 3 billion dollars each.

The profits come amidst a global semi-conductor shortage, which has forced companies to slash their production numbers. However, Ford and General Motors seem to have found a way to register huge profits, even with reduced production.

Reports suggest that General Motors has focussed its production on high-demand models with high margins. These include full-sized offerings such as the Chevrolet Silverado pickup, Cadillac Escalade and GMC Yukon among others.

The company is reported to have shifted the supply of chips from small cars to models with higher margins. The company has even idled the facilities manufacturing smaller models.

By doing this, the automakers have realised that they can register better results without stockpiling or padding sales volume with smaller cars that have low margins.

Automakers are now looking at a different approach towards achieving higher profits. Companies like GM, Ford and Daimler have been working on matching production and inventory numbers to customers demand.

The three companies want to do away with the tradition of aiming at higher sales volumes and putting pressure on keeping their factories running.

Source: Reuters

 
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