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6:30 pm
Thu July 25, 2013

GM makes $1.2 billion quarterly profit - same as Ford

General Motors is number two in global auto sales so far this year, just behind Toyota, and just in front of Volkswagon.

So why didn't GM make more money than its Dearborn rival, Ford Motor Company, in the second quarter?

Both companies made $1.2 billion, but Ford made that money based on a lower volume of sales.

Experts say part of the answer lies in Ford's restructuring strategy, which dates to 2006, when the Dearborn automaker took out a massive $24 billion private bank loan.  At the time, some observers said it was a crazy move.

Turns out it wasn't crazy.

Michael Ward is the auto industry analyst for investment firm Stern Agee.

He says GM is still regaining its momentum after the bankruptcy, which forced the company to delay some product programs.

Meanwhile, thanks to its cash cushion, Ford avoided bankruptcy, and got an earlier start on the process of reducing global platforms.  (A platform is the infrastructure underneath the body of a car).  Fewer platforms equals lower development costs.

Ford also still has a wholly-owned and profitable, lending arm.  

GM lost its captive finance division during the bankruptcy, and has been rebuilding one from scratch since.

Ward says Ford is also making more money per vehicle, in large part due to products it developed with the $24-billion loan, options like Ecoboost engines and the MyFordTouch interior control system.

"I think GM is also along that track," says Ward.  "They've been getting better with it, and they're trying to play catchup as fast as they can."

GM says starting next year, it will offer 4G wireless connectivity in most of its vehicles. 

Both companies are on an equal footing in Europe, says Ward.   The region is in a deep recession, which has cripped car sales.

Both automakers have swiftly reduced their losses in the region, Ward says, closing factories, slashing inventories, and investing in new products.   He figures that will position both companies to thrive once Europe's recession eases.