RenoIV

Interesting info ... Given Mazda's desire for increased market share, it seems unlikely they would cut production 50% after just one year. I could see a small price increase ... many folks think I paid substantially more for my 8 and are openly shocked when I tell them the price range of the 8. They would have to be very careful raising the price ... The failure of the FD to remain in the states was partially due to its high price point.

RX22

I think Mazda learned their lesson with the last RX7. I see the price staying where it is. But I do agree it's a great deal.

Red Devil

Same with RX22, they openly targeted the ~30K range, why would they suddenly raise the price and alienate the market they have established?

Also, I don't remember who said it, but yes, Ford is broke. A few bad years has ruined them. That's why they have been raiding their pension fund. Do a search on the Wall Street Journal and you may find their article from several months back regarding the issue. Both Ford and GM are so heavily in debt that several times they have almost come to the point where the creditors have had to declare insolvent.

MTLbroker

Actually, the pension shortfall issue has abated. Many fortune 500 companies were in the same boat after the tech bubble burst. Last year's market performance as well as the prospect of higher rates has returned GM's pension into a surplus. GM's latest quarterly results beat the street. Ford is expected to announce good results as well.

They are not going bankrupt despite some poor corporate performance the last 3 or 4 yrs. However, if the economy slows down, I see them offering incentives again. Incentive wars are what may hurt them.

BTW, the current exchange rate for U$ vs yen is about 109. Back in 1995, it was 80. If the U$ were to fall to 1995 levels, it would imply Yen would be 29% more expensive. That would bump up the price of all japan imports. In early 2002, the exchange rate was approaching 130. Just my 2 cents (2 yen?) worth.

boothguy

Mazda historically has priced the first-year versions of its performance cars very low and ratcheted the price upward thereafter. I don't recall what the increases were on my 2gen RX7, but I'm pretty sure the increases were substantial on my 3gen. But then, that's typical of any manufacturer, and an acquaintance of mine who works at Mazda NA tells me plans for a new RX7 have been shelved indefinitely. And given how in-the-know dealer personnel are in general about their product, I'd say this guy was blowing smoke. Literally.

Labop

HAAAhahahahaha :D

bumperauto

Dealerships know less about cars than the gerneral public. what is worse is they tell you something totally BS. i deal with many parts stores, body shops and stealerships everyday.
without a part number in front of them they are as confused and a frenchman with a bar of soap. joe

grogiefrog

When I go to test drive, I research the car first so that I know the good and the bad rather then the spin that a salesman feeds you. It makes me wonder if their use to getting people that don't know a damn thing about the car, or if they are just use to talking BS? To hear some of the things that they say, you've got to be a moron to believe it.

northern-8

I agree completely!. When I bought my 8, I just wanted the salesman to sit in the backseat while I test drove, then give me a price when I got back to the dealership.

I must admit though that my salesman was pretty good. He knew the car well and wasn't pushy at all.

Red Devil

MTLbroker,

How has the pension shortfall been abated? Both sold their vehicles at low to zero interest. Pushing inventory and recovering cost doesn't create a surplus of cash to refund their pensions. They simply traded on future earnings to pad the present. GM's fairly recent sale of DirectTV all went back into their pension, and that still only put in less than 50% of where they should be.

How does the "prospect of higher rates" put money in GM or Ford's pocket? I take it that you are a stockbroker? I don't claim to be an economist, so you'll have to explain more in-depth to convince me otherwise (no sarcasm, please do). When I look at a company, I was taught to go by capital and depreciation, along with short and long term debt. Breaking the market's forecast for earnings is not a measure by which to claim that either company is suddenly on easy street.

MTLbroker

After the tech bubble, many fortune 500 companies were dangerously close to violating their pension funding guidelines. With the recent market performance, many of said pensions have posted double digit returns which effectively helped to bring their funding levels significantly over minimum necessary to perpetuate the fund. While the pensions cannot be said to be fully funded, the underfunding situation has abated. The prospect of higher rates i.e. steepening of the yield curve will take some of the pressure off the pension managers to constantly look for higher market returns which may or may not be there in the future. However, the higher rates will help the pensions. You have to understand that the lowest rates in 40 years have done absolutely nothing to aid the pension funding issue. I should correct on line in my previous post in that better market returns and higher rates will put GM pension at a PROJECTED surplus at some point in the future. Also, there is absolutely no evidence that either of these companies have raided their pensions. Do you honestly think the UAW would allow that to happen? As far as selling DTV, GMH has been on the auction block on and off since 1995. If what you say is true and the entire proceeds of the sale went into their pension, then the corporation should be commended. They are addressing the pension shortfall first and foremost (mind you, GM has no choice in the matter). They could just as easily left the pension shortfall carry forward and use the GMH sale to pad their bottom line (but I doubt lawmakers would let that happen).

But you shouldn't shoot from the hip and claim Ford and GM are broke. If you did that to an individual, you'd open yourself up to a slander suit. I'm of the camp that doesn't believe F or GM are bankrupt. I deal GMAC paper and Ford Paper all day long. They are rated BBB by S&P and A3 by Moodys. But hey, don't take my work for it, just read the following interesting article from Forbes.

"Ford Tough
Forbes
Jerry Flint
March 10, 2003

Is Ford going bankrupt?

The story was reported this past Friday in the Daily Telegraph of London. Understand, London newspapers have been having trouble keeping readers interested since Diana died and Fergie started wearing tops.
So let's cut to the chase.

Ford Motor is not going bankrupt now or in the near future. While nothing is impossible, I rank the chance as something less than the possibility that aliens from outer space--all resembling Pamela Anderson--will land from rocket ships to seize Earth, and that Saddam Hussein will win his war against the U.S. in a mano-a-mano arm-wrestling contest with President George W. Bush.

In reporting on the ups and downs of the auto industry over 50 years, I have a few ironclad rules. And while I do not sell investment advice, one rule has been to buy General Motors at $30, DaimlerChrysler at $10 and Ford at $6 (meaning anything under $7). This isn't buy and hold forever. This is buy and sell when you have a good profit.

The rumors about a bankrupt Ford apparently started with a Feb. 28 piece in Grant's Interest Rate Observer, quoting Sean Egan, founder of one of the smaller credit-rating agencies, Egan-Jones. The Daily Telegraph's New York-based writer picked it up and ran with it last Friday.

The stories focus on the problems in Ford's auto business and Ford's huge debt.

First, the business: No one has been more critical of Ford's product programs than I have. No one. If you read Forbes.com, you know that. Ford has been slipping. There isn't enough new product. Management has seemed uncertain about what to do with Ford, Mercury and Lincoln cars. General Motors has grabbed the lead in truck (SUV) sales from Ford.

There are problems for Ford in Canada, Brazil and Western Europe as well. But none of these problems is beyond solution. The biggest question is whether the leadership is up to the job. Chairman William Clay Ford Jr. fired the previous chief executive, Jacques Nasser, and just in time. The new leaders are competent, but they aren't inspirational like Lee Iacocca or Robert Lutz. Fair enough.

The bigger issue is the market today. Sales are falling; the economy is sluggish; the stock market is sinking; we're about to march on Baghdad; and gasoline prices are pushing past $2 per gallon. None of that is good for the auto business.

Sales have run to 17 million units in recent years. But, remember, the Gulf War aftermath sank them down to 12.5 million a decade ago. If they go that low, everyone would be in trouble--but that doesn't mean bankrupt. My best guess: Sales will drop a bit from last year and end up closer to 16 million, rather than 17 million.
What the doomsayers forget is that although Ford has problems, it has strengths, too.

Its dealers in America are the best in the business. As in the past, they can carry the company when product slips.

Ford has the world's best-selling sport utility vehicle in the Explorer, the best-selling small pickup in the Ranger and the best-selling big truck group in the F-Series. Ford is within a couple of hundred units short of having the best-selling small SUV (the Escape); plus, it has the best-selling sporty car (Mustang) and the best-selling rear-wheel-drive sedans (Mercury Grand Marquis and Ford Crown Victoria). The European business seems to be recovering, too.

For new products, the big F-Series pickup comes out this year; Ford could sell 1 million per year when all the truck plants are rolling. A success here would go a long way to turning around Ford's image.

In the pipeline: a sexy new Mustang, a large sedan called the 500 and an all-wheel-drive sports wagon.

It's not enough new stuff, but it's a start.

The other issue in the bankruptcy nonsense is Ford's debt. The Telegraph put it at $150 billion. That lumps together a lot of unlumpable things. The largest amount is the debt of the Ford credit arm, which finances the cars and trucks Ford sells. Those loans are backed by people paying off car loans. That isn't a problem.

Another big chunk is the pension debt. This debt isn't fully funded ($7 billion underfunded in the U.S.), but it's due over decades. Saying a company can go bankrupt over this debt is like saying, "The social security fund will run out in 2025, so let's all move to Canada now."

Ford says it has $25 billion in cash and, after debts, $11 billion in net cash for its automotive business. The company says the pension debt is manageable. It looks manageable to me, and I've been reporting on this stuff for half a century.

I'm not saying that the pension and future health care costs aren't a problem. A $7 billion obligation isn't a joke. Over the years, either profits or some assets have to be pushed into the fund. That's what General Motors is doing right now to beef up its fund. Of course, it would help if the stock market turned around.

Companies just don't go bankrupt because of underfunded pension funds. What counts is if the company is successfully selling its product and making money. If it is, the pension problems get solved.

Detroit automakers--Ford and GM--are old-economy companies. They aren't Enron or WorldCom, and they don't exist in smoke and dreams. The car companies own factories that make real products. The accounting isn't aimed at pushing up the stock to trick investors. I'm talking about honest companies run by honest men. Yes, they make mistakes. But when they do screw up, they--and you, dear reader--hear it from me.

Look at General Motors, which was in worse shape than Ford and has been turning around its U.S. business. The same thing will happen to Ford."

MTLbroker

BTW, selling cars at low to 0 interest is a fact of life for car manufacturers. At historically low rates, the spreads between the cost of money and what they have to finance you purchase have narrowed to a point where it makes a good business case. It's not an ideal situation, but moving the metal is infinitely preferable to letting you inventory age. In business, you WANT to turn over inventory. Even if it means taking a loss. If excess inventories build up, you have a problem. You must finance the inventory, you have to slow production, lay off workers, or worse, pay them to sit at home (union benefits). Better to keep the cars moving, keep you workers working. So you don't make money on financing at 0 interest. It's better than paying interest to keep overstock. A rolling stone gathers no moss. I am a philosopher too........ haha

poolsidenaz

Congratulations!! You've been spun by a salesman.

m477

NEW FORUM RULE

I say we create a section called "The Cesspool", and any posts of the form "My dealer told me [some bullshit]" get immeadiately moved there.

Red Devil

..."Cesspool" idea sounds pretty good.

Underfunding was the correct way to put it, I admit that. And I have no problem with pushing inventory. I work in the rail industry and deal with the unions everyday, so I know all too well about them getting paid, regardless of whether they work or not.

If I find the Wall Street Journal article I read, I'll post it here or PM you.

devoid

Since the "Cesspool" hasn't been created yet...

Well, I don't know what you guys are talking about, but the original salesman (saleskid) I dealt with was a riot. Since having known so much about the car already, I was simply testing the dealers to see if I wanted to deal with them. I asked about the stearing being electronically assisted, and he responded, "Oh yeah, its completely drive-by-wire, just like the throttle. There is no physical connection like regular cars." So here I am thinking to myself, what a moron...have you looked under the hood? 1. That would mean you couldn't stear the car when it stalled, oh yeah, a real accident causer 2. The gov't would never allow it b/c you need to have a manual backup b/c of reason 1. And the classic, I asked him, while standing right in front of the car and pointing at the headlights, are they HID? His answer, "No, they are xenon halogen" The final blow was that he demanded that these were such hot cars they woudn't nogotiate, but must sell at MSRP.

Needless to say, I never went back and have since dealt with a better dealership. The ultimate salesman I ended up buying from ownes his own 8. Straight off the bat I was offered $200-300 over invoice, however I bought on ford s-plan. He has been open and honest, and if he hasn't known something, he admits, and if I do know, he appreciates being informed. I've also informed him of this forum.

The point of this is that there does exist salemen who are honest and know what they are talking about, but even better, readily prefice something they tell you as rumor. You need to know the car, and call the salesman's bluffs. Shop around, and never deal with a dealer/saleman you don't trust, cause you'll pay throughout the years, especially if you use them for service.

Finally, as with everyone else, I agree Mazda wouldn't screw up this car by drastically raising the price or cutting production in half. They will do what they need to in order to make a profit and not flood the market with this car, but not force the price up by making it rare...we're not talking Ferrari selling tactics, making 1 less than you think you can sell.

c2k4-8

For 40 grand I'd by a Vette!

88gt

Why in the world would a car salesman tell an existing customer that??? Is he looking for you to buy another vehicle tomorrow before prices go up.... Sounds like typical salesman BS.
A vert RX-8 is not likely.. There would need to be a complete redesign of the 8..

RenesisPower

This issue is not that complicated. We all know Mazda is only capable of making 60,000 Renesis engines per year in their Hiroshima plant. Cutting it by half to drive prices up does not make economic sense since they can not survice on 30,000 cars per year.

I also agree that a saleman at any dealership knows a lot less than any of us about cars, Mazda production strategy, models, options, prices, etc. So take anything you hear from car salemen with a grain of salt.

mysql101

If the RX-8 is their flagship car, and they aren't making nearly as much money off each RX-8 as their 3's and 6's, I don't see why it would be out of the question for them to drop production of the RX-8 (Keep in mind I don't know how much each car makes, so I'm just stipulating).

It would make sense, especially given the fact that the RX-8 no longer even sells anywhere close to MSRP during it's first year out.

RenesisPower

Dealers make $2,003 on a base car and $3,203 on a fully loaded one at MSRP. Industry average for the manufacturer's profit is 11% so for 60,000 units per year it adds up tp $217,800,000 profit for the RX-8 line.

mysql101

Renesis, thanks for that bit of info.....

My next question is, is that pure profit, or is that money that they have to use up to deal with warrantee issues and other things? Because if it is the latter, the number no longer sounds very impressive

We also have to keep in mind dealers don't seem to be selling at MSRP anymore.

RenesisPower

Very true, so all the above numbers are on the high end. I bought mine last year at MSRP but today I am sure you get it at lower than MSRP.

The Mazda profit estimate is gross profit and is actually not bad for just one line of car with fairly limited production.

The most profitable car company in the world is Porsche with 17% progit margin on their cars.

mysql101

I don't know how much I'd read into that, since Porsche doesn't sell nearly as many cars as those with lower profit margins

RenesisPower

Jason,

That is average profit per car so the quantity is irrelevant.