Ford is looking pretty savvy these days when it comes to money management.
It still owns Ford Credit, the company’s lending arm, and more telling than that — it has a 12 percent operating margin which is more than either Chrysler or GM. It’s also the highest operating margin the company has reported since it started releasing the regional numbers in 2000.
But what is an operating margin? It’s a company’s net profit shown as a percentage of the company’s overall revenue, or in the auto industry’s case a strong indicator of the average profit margin on an automaker’s cars.
Ford has a swath of new cars in its lineup, and as the Detroit News reports, those are a key factor in boosting a brand’s profits because new cars typically command a higher price premium. That alone isn’t enough to hoist the brand to its current levels. Instead, Ford is able to take advantage of a few other factors helping to maximize profits per sale.
First, it counts the F-150 among its products. No small potatoes, the truck is more than just the best-selling truck in the U.S. which is a segment with traditionally high profit margins. It’s also the best-selling vehicle overall.
Finally, Ford is able to leverage the fact that it still controls its own lending ability to offer attractive financing offers rather than putting cash on the hood like the competition is being forced to.
[Source: Detroit News]