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Howes: The ripple effect of UAW and Fiat-Chrysler indictments, and automakers’ mid-year earning

Jul 27, 2017

Detroit News business columnist Daniel Howes says GM's 2nd quarter profit margins could help convince Wall Street investors that American automakers can return profits, and not just burn through capital. Seen here, the GM Renaissance Center in Detroit.
Credit Steve Carmody / Michigan Radio

Automakers released second-quarter earnings for 2017 this week, and Detroit News business columnist Daniel Howes says, on the whole, American companies are doing good business.

Fiat Chrysler Automobiles (FCA) has the most reason to smile, according to Howes. He says FCA profit margins are rising both globally and in North America. And he says demand for cars is continuing to decline in favor of larger SUVs and trucks.

“That’s a good thing because the mix, as they say in the business, gets richer,” Howes said. “And that has shown on the bottom line and these companies, all three of them, are showing that.”

The numbers didn’t look as good for General Motors, which is in the process of selling off its branches in foreign markets. Howe’s says GM is getting out of Europe, India and South Africa, and the effect is a drag on GM’s earnings this quarter. But when it comes to profit margins, Howes says GM clocks in at 12%.

“That is really kind of unheard of,” Howes said. “You’re starting to get into luxury-vehicle [type numbers].”

Howes says the growing profit margin is a key to convincing Wall Street investors that American automakers are serious about making the most out of their investments, and not just burning through capital, a traditional habit.

Federal indictments were also announced this week for Alphons Iacobelli, a former vice president of labor relations for FCA, and Monica Morgan, the wife of a recently deceased vice president of the United Auto Workers.

“What they were doing is using joint monies that are at the FCA national training center, and essentially siphoning them off for their own personal use,” Howes said. “For paying off student loans, doing landscaping and putting in a pool and buying clothes, and cars -- it’s unbelievable.”

Howes says the UAW has prided itself on being a “clean union” for decades. The money alleged to have been embezzled didn't come from union dues, but from FCA coffers.

Howes says there could still be more heads to roll at FCA, but no more charges have yet been announced.

Listen to the entire conversation with Detroit News business columnist Daniel Howes above.  

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