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.
Here are some quotes from Ducati's SEC Documentation
DUCATI MOTOR HOLDING SPA
Form:20-F Filing Date:7/14/2006
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.
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."
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.