So, we get smaller cars, which are mandated via the regulations issued by governments, which are supposed to save energy and to save the environment.
Consequentially, we get smaller cars, which means smaller profits for car makers. Smaller profits is the same as less income to a company, which then has to lay off people, and in the least, not hire new people.
Another consequence of smaller cars is that, the oil/gasoline industry will also see less in profits, since people won't need to be filling their gas tanks as often. That too means less income to the distributors and retail gasoline outlets, which again means, people getting laid off, or in the least, no new hires.
Even one more consequence of the smaller cars is that, a smaller and less expensive car, is not made as well as a more expensive and bigger car. Which means that, those cars won't last as long, and people will have to make new purchases of automobiles more often, which means that, there will be less disposable income to consumers for other goods and services not related to cars, which means that, other industries will see less money available to consumers for purchasing their goods and services. The domino effect in the economy (aka: the repercussions to the rest of the economy) is something that, government officials and the people who advocate for big government, never mention or pay attention to when they're drawing up their regulations and bills and laws.
So, we end up with micromanagement of economies by government, and no growth anywhere in those economies, and oftentimes, contractions of those economies.
Ford Motor Co. has enjoyed high profit margins on sales of larger car models, especially SUVs. But as consumers preferences shift to smaller (read: less expensive) vehicles, the automaker has said it expects its profit margins to shrink as well.
“We continue to see consumers trading down to smaller vehicles,” said Ford’s president of the Americas region, Mark Fields, at the Barclays Capital 2012 Global Automotive Conference on Wednesday. “Less trucks, more small cars and those vehicles have smaller margins.”
As consumers downsize from larger vehicles to smaller models, Ford’s profit margins in North America are expected to fall to between 8 and 10 percent over time, compared to 12 percent in the third quarter. In the first nine months of 2012, Ford saw an operating profit margin of $6.47 billion before taxes in its North America sales, which translates to 11.2 percent (compared to an industry standard of 5 percent). But Fields said its margins would fall in the fourth quarter.
Fields is soon to take over as Ford’s COO, after a tenure running North America’s operations that saw record losses only four years ago turn to record profits this year.
Industry watchers will be interested to see how Ford - and other automakers - adapt to consumers’ changing preferences, and what effect this could have on business strategy.
Photo: Ford
via [Automotive News]
