Without any luxury brands except Lincoln, Ford (F) reported a $2.1 billion profit for the first quarter, versus a net loss of $1.4 billion in the year-ago quarter. It was Ford's best result in six years, according to President and CEO Alan Mulally.
Daimler (DAI), on the other hand, shows that there is some life left in luxury. The German carmaker reported a first-quarter profit of about $850 million, versus a net loss of $1.8 billion at the same time last year. Pre-tax, which is how Daimler usually expresses its results, that's a profit of about $1.7 billion versus a year-ago loss of about $2 billion (see chart). Worldwide sales of Mercedes-Benz passenger cars were up 20 percent for the quarter, to 277,117.
So Ford and Daimler, starting from different circumstances, ended up in much the same place. That is not as surprising as it seems at first glance: In important ways, Ford and Daimler are mirror images of each other.
Ford is turning itself around at least in part because it dumped its luxury brands-- Aston Martin, Jaguar, Land Rover and Volvo. Daimler is turning itself around in part because it dumped its mass-market partner -- Chrysler.
It seems obvious now, but both Ford and Daimler would have been better off sticking to what they do best.
- Daimler is a luxury car-maker that aimed to lower its risk by diversifying into new markets. However, Daimler and Chrysler never accomplished much in the way of sharing costs by developing products in common. The original vision was also to bring in a strong Asian partner as the third leg of a global "three-legged stool." In practice, DaimlerChrysler had to settle for the financially troubled, second-tier Mitsubishi Motors.
- Ford is a mass-market manufacturer that took a fling at creating a suite of luxury brands it called the Premier Automotive Group. A key element to Mulally's turnaround plan for Ford is to achieve profitability at any level of demand: He plans for the worst and hopes for the best. The traditional practice of the auto industry was to plan for the best -- building lots and lots of cars -- and try to ride out the worst. That resulted in the worst of both worlds for Detroit. Even in the mid-2000s, when U.S. sales were around 16 million units a year (compared to about 10 million last year), the industry still couldn't achieve consistent profitability.