The Stronger Dollar and Pricing - Fact or Fiction ?
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Thread: The Stronger Dollar and Pricing - Fact or Fiction ?

  1. #1
    Poser Emeritus Array bill's Avatar
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    Aug 2003
    Lower Mainland

    The Stronger Dollar and Pricing - Fact or Fiction ?

    Ok I have had it with the whole explanation that the strong dollar is the reason we are paying more. That is in my view unmitigated horseshit.

    Please don't try to tell me that Honda or Ducati sets their corporate future profits on the strength of the CDN Dollar. The Canadian Dollar has increased partially because the US Dollar has dropped versus the other world currencies. Ducati and Honda are basically neutral because as one currency goes up another falls.

    All Companies who sell worldwide have extremely sophisticated financial
    Instruments for protecting themselves from spikes either way in the dollar. My smallest clients do currency hedging and buy forward.

    Read these two articles for the knowledge you need, this first article takes a minute to load text.,00.html

    Here are some quotes from Ducati's SEC Documentation

    Form:20-F Filing Date:7/14/2006

    Exchange Rates

    Fluctuations in the exchange rate between the euro and the U.S. dollar will
    affect the U.S. dollar equivalent of euro prices of DMH's shares listed on the
    Mercato Telematico Azionario ("Telematico"), the automated screen-based trading system managed by Borsa Italiana S.p.A. (the "Italian Stock Exchange") and, as a result, are likely to affect the market price of the ADSs in the United States.

    Exchange rate fluctuations will also affect the U.S. dollar amounts received by holders of ADSs on the conversion into U.S. dollars by the ADS depositary of any cash dividends declared and paid in euro on the shares represented by the ADSs.

    Risk Factors

    Investing in our shares or ADSs involves certain risks. You should
    carefully consider each of the following risks and all of the information
    included in this annual report.

    We have a recent history of losses

    We experienced net losses of €41.5 million in 2005 and €3.5 million in
    2004. We attribute these losses in part to general economic conditions, which resulted in decreased motorcycle registrations in the markets in which we operate, to increased raw material costs and to the weakening of the dollar against the euro. These macroeconomic factors hurt our financial condition, already weakened by a delay in the rotation of our product portfolio and by deterioration in our product mix, which had an increased percentage of sales of lower-margin motorcycles. See "Item 5. Operating and Financial Review and Prospects-Liquidity and Capital Resources." There can be no assurance that the macroeconomic factors described above will improve, that raw material costs will not remain at today's historical high levels or even further increase, or that we will be able to effect a timely rotation of our product portfolio or improve our product mix.

    Our future profitability and financial condition depend on the successful
    Implementation of the 2006-2008 Business Plan and the validation of the
    assumptions and expectations on which it is based

    Our future operating and financial performance and business prospects will
    depend in large part on the successful implementation of our business plan for 2006-2008. Following the purchase of 30% less one share of our share capital by World Motors S.A. ("WM"), World Motors Red S.c.A. ("WM II") and World Motors White S.c.A. ("WM III") in March 2006, our board of directors, appointed at an ordinary shareholders' meeting on April 10, 2006, approved the 2006-2008 business plan on April 13, 2006. The business plan focuses on improving profit margins and generating cash flows by increasing sales of motorcycle models in the high-end of our product price range and decreasing overhead costs. The plan also called for a capital increase, which was successfully completed in June 2006.

    We have formulated the 2006-2008 business plan on the basis of assumptions about several factors that are beyond our control, including: (i) the evolution of the motorcycle market; (ii) inflation rates; (iii) the euro/US dollar exchange rate; (iv) financial expenses; (v) tax rates; and (vi) labor union relations. If one or more of the assumptions turns out to be incorrect, in whole or in part, our actual results may differ, possibly significantly, from
    the targets in the business plan and there could be a material adverse effect on our financial conditions, results of operations and business prospects. For more information about our business plan, see "Item 4. Information on the
    Company-Business Overview-Business Strategy-2006-2008 Business Plan."

    End Quote

    So, if the CDN dollar fell $0.20 cents today do you really think that Honda BMW or Ducati would lower their prices accordingly on motorcycles that they claim have only gone in price up because the dollar was so high.

    What we have here right now is a bunch of consumers who live near a large market (USA), two countries who signed a Free Trade Agreement, a highly educated consumer with finger tip international knowledge of prices and foreign exchange rate. Combine this with the target market for new riders being the two demographic groups who are the most internet aware consumers and manufacturers are running scared.

    What is of more concern to me is that some manufacturers, have been able to modify and control the RIV process (recall letters) make restrictive trade practices (threats of no warranty coverage) as a method of collecting additional revenue. They are in effect adding their own set of punitive taxes onto the cost of importing legally a vehicle into Canada.

    If BCCOM wanted an issue to prove their worth as our spokesperson they would speak out on this type of activity.

    Now lets talk about distributors. Parts Canada is where, I have been told the dealers buy their tires. I have stated on here many times that I buy my tires in the States. They arrive with Parts Unlimited or Drag Specialties wrapping. I have been told by my dealership that if they import tires as a dealership they have to pay more "duty" than a private citizen.

    Just think about that for a moment. Since when did the Feds ever charge a business more to import an item than an individual citizen? As far as I know Import Duty is Import Duty. Volumes of goods require special paperwork and brokerage fees but order volumes create the opportunity for vendor discounts.

    So now lets talk about the small market theory The US is 10 times bigger. So what Canada has been a cash cow at current MSRP, if not the MSRP would have been higher, now the free market forces are taking effect.

    There are so many inefficiencies in the NA market place. Need a part for your bike not available in Canada , even if the USA has 40 in stock SOP is to get it from Germany/Japan. My Goldwing parts have to come from Japan. I went thought this with Honda 2 years ago and BMW many times. KTM has a North American distribution centre (finally) and offers a NA Warranty on its bikes. NAFTA makes this possible. Honda Automobile owner don't have to wait 6 weeks to get front suspension and when I drove a BMW Car parts were in either that day or overnight from Toronto or 2 day from Europe. I never got the same level of parts service from BMW Motorcycles. How is that possible?

    The Manufacturers are giving incentives and hoping to dump still high MSRP stock on unsuspecting or rather unsophisticated buyers who are happy because they got $4000 off on a Wing where they could have saved 9,000 by buying the bike in the States. A dealership I deal with had a staff member who was very angry with me for buying a KTM from the US; KTM is a brand they do not sell. Yet for a few years this very dealership imported Ninja 250's (not then available in Canada), and a brand they did not carry, and sold them at a handsome profit.

    It is no longer a case of what is good for the goose not being good for the gander. I have always spent 100 -200 a month on stuff at my dealership, knowing full well that I am subsidizing the Canadian Motorcycle Industry; but why and for how much longer should I reward an inefficient business model? Why donate an extra few thousand dollars to keep someone's business open if they don't see this as a two way street. It is easy to simply increase my Internet purchases. I know many of you do this I see the motorcycle parts at the Letter Carrier in Pt. Roberts. A motorcycle is for most of us a discretionary purchase. If we were willing to drive to the States to buy cheaper gas, eggs and milk (necessities) why wouldn't we buy other items there as well?

    In the States show up on your bike with tires to be mounted and you pay one price, show up with your new tires and the wheels off the bike different price for labour, show up buy tires and labour is a different price. This is fair and my bike’s country of origin or the place my tires came from is not a tool to punish me by, the one constant is the rate of labour. Free market. In Las Vegas there is a place that all they do all day is mount and balance tires and the smaller dealerships all patronize them as well.

    Those of us who own businesses understand how difficult it is to remain profitable and competitive. We want to deal with suppliers who can provide the products and/or services we need at a reasonable price.

    The most logical and easiest path for the manufacturers is to change the rules about importation on Motorcycles. I would not be surprised to learn, much after the fact, that plans are being worked on to fix this problem in the best possible way for the Manufacturers, not the dealers and certainly not the consumers.

    In many ways Fish Antlers is the Mark Emory of MC importation. No one, not the manufacturers, the dealers and certainly not the consumers knew this is where the market would go. We are using the Internet, our own Free Trade Agreement and Market Inefficiencies to take positions in what essentially are New Motorcycle Futures.

    The Motorcycle Industry, a cyclical business doesn't have the ability on a national basis to react. Individually each company Canadian Operations will report lower sales but also a shrinking total Canadian marketplace (i.e. no one loses their job) but Mavis in typing and John in shipping get early retirement. I forecast we will see no significant price reductions on new bikes till mid 2010 and Dealers in BC will fail whether I buy riding socks there or not.

    BCSB had mountains of experience with a lot of things. #1 on that list is pouring out bullshit to dumb questions by the Gigabyte. (TripleTime, 12-10-2014 03:19 PM)

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  3. #2
    D.I.L.L.I.G.A.F. Array Deuce's Avatar
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    Right On Bill

    Agree with you 100%
    "Experience alone is not the great teacher; Experience has to be multiplied by intelligence to yield sustained progress." Phil Schilling

  4. #3
    Registered User Array kaos's Avatar
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    nice write up

  5. #4
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    The prices in th US should be rising as the US$ takes a hit against the Euro and Yen. Since the US economy is slipping into a recession there is no pricing power for goods in the US. The US consumer is on life support.

  6. #5
    Reid Array 2>4's Avatar
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    2007 DRZ400SM, 1999 R6 (sold), 1996 Bandit (written off), 1990 FJ600 (written off), 1987 CBX250 (sold)!
    thanks Bill...really!

    but all that left of this horse is bone fragment it been beat soo long

  7. #6
    Registered User Array feliz's Avatar
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    Good information, thanks Bill.

  8. #7
    Registered User Array navarcht's Avatar
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    Personally I think what is happening is that we here in Canada are paying "standard" prices while in the US (which represents 20% of GLOBAL consumerism) the bike manufacturers are giving a deep discount in order to stay in the market place.

    Consumers typically have a static idea of relative value, i.e. "the bike I've been thinking of buying for the past few years is $XXXX.00 "(+- a few dollars.), So lets say that the bike is a BMW that costs 10,000 euro to make 5 years ago, at that exchange rate the bike would have to sell at $10 656US ($15005cdn). Today that same bike at 10,000 euro (assuming manufacturing costs haven't gone up) would have to sell at $14,660US ($16355cdn)

    So American buyers would think they're really getting screwed having to pay $4K more (while Canadians only have to pay just over $1K more) and would likely not buy anymore BMW's and just walk away. Being that the US is such a big market globally BMW can't afford to lose that sort of business so they'll take a loss to maintain market share. Smart Canadians take advantage of that discount as best as they can before the manufacturers plug the holes in the cross border trade.

    Part of the issue is that the average American has no idea their $ is in the toilet.

  9. #8
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    89 Suzuki RGV250
    The newspaper couple of months ago said the CDN $ has gained 14.2 percent on the Euro from Jan 4 to Nov 4 this year.

    Also notice the Brit pound was 1.99 this morning instead of 2.25 like it was a couple of years ago. Hence Brit and Euro bikes "should" be cheaper.

    IFany of the distributors had a brain they bought massive amounts of Pounds and Euros when the dollar briefly hit 1.10 US. They will coast on this investment for quite sometime.

  10. #9
    Moderator Array TeeTee's Avatar
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    It's been said before and I'll say it again. The motorcycle market is a lot slower moving than refigerators, cars or big screen TV's. Ask your favourite dealer just how many bikes a year then sell and I think you'll be shocked at the low figure. A typical car dealership has to move that many units a month just to keep the doors open.

    This all means that it takes much longer to move the old stock left with the distributors and that is already in shipment. The factories are not constantly churning out bikes in parallel production lines. They gear up, make a year's supply of one bike then swap over, gear up and make a year's production of the next model and so on for the big 4 and likely many of the larger secondary companies.

    This all means that the price we see on the tag has a lot more inertia to change than many of you are allowing for. Also as pointed out already much of the disparity has to do with the US dollar falling. If the dollar stays devalued with them for long enough you'll see the prices rise on the new stocks over the next year to more closely match the purchasing power of the devalued dollar. Oddly enough Gold Wings and a couple of other models being assembled in US plants using a mix of parts from both the US and Japan will likely not be hit as hard as the labour portion won't be valued as highly.
    A backyard mechanic without a service manual is just like a hooker without a lamp pole.... they are both in the dark.

  11. #10
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    [QUOTE=navarcht;1089059]Personally I think what is happening is that we here in Canada are paying "standard" prices while in the US (which represents 20% of GLOBAL consumerism) the bike manufacturers are giving a deep discount in order to stay in the market place.

    Exactly, that's it in a nutshell. You need look no further to explain why we're paying what we are: we're helping to subsidize the manufacturers as they try to stay in their biggest marketplace: the US.

  12. #11
    Registered User Array bacchus40's Avatar
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    Thumbs up

    Quote Originally Posted by 03terminator View Post
    The prices in th US should be rising as the US$ takes a hit against the Euro and Yen. Since the US economy is slipping into a recession there is no pricing power for goods in the US. The US consumer is on life support.
    this i agree with 100%, just look at the real estate world & the amounts of foreclosures US wide.. they are in major trouble down there.!

    and in true Canuckistan tradition, local businesses are doing fuck all to avoid a similar scenario..

    I personally bought my RSX Type S! from SEattle a month ago.. to the day pretty much... saved roughly 8 Thousand bucks.. that is no small change.. actually thats the true worth of my 'used' R6 here in canuck-ville!

    well guess what, if i am not to get the worth of my bike when it comes time to sell, then i'll just have to work harder in order to keep the beast around, i cannot argue with local buyers either, hey, i practically agree locals cannot compete.

    I was faced with the whole 'ordering online' decision early on and i do not regret it one bit, when it came time for 'my dealer' to give me a break, that million dollar smile was no-where to be found!! what a fucking surprise... BIG mistake! i do have internet access as do the rest of us consumers... and since i'm not riding around through winter months, i also have time to learn all there is to know about how to source out my own parts for much cheaper! n' make sure my plate is full at dinner time.. not some one elses..!!

    +1 for a great write up Bill, i for one thank you for putting this up, and I agree that this is not our problem, let the dealers figure out how to keep their customers around, for the most part, i really dont need them since i dont mind getting my hands dirty.
    Last edited by bacchus40; 01-20-2008 at 02:34 AM.

    Quote Originally Posted by Land Roving
    Life is too short to own ugly motorcycles.

  13. #12
    Registered User Array bcrider's Avatar
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    it's yellow
    What we need is a North American Union. No borders from Canada to Mexico. Compete or die. Several years ago EU manufactures (BMW, MB at the time) had a problem with sales. You could fly to Italy and buy your BMW for $10000 than you could in Germany. Big sanctions, you couldn't sell to Germans, no warranty same BS as here. End of the day it was determined that they can't do that and manufactures adjusted. Now thanks to our exchange rate people are beginning to realize the "superb" deal Canadian retailers were offering. Irony here is that you could find deals at 80 cent dollar, now at par it is just a ripoff.
    If you want your spouse to listen and pay strict attention to every word you say, talk in your sleep.

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