Gaglug
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- Oct 3, 2018
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- Steve
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That is a complete misunderstanding of how basic manufacturing businesses work. I really don't want to go through the effort to explain basic business principles to you so I'll try to dumb it down as much as possible. If you are a business and you have a product line that continually underperforms, you have to jettison that line or that unprofitable line will end up dragging the entire company down with it.Bigyzf, there is a huge shift towards trucks and crossovers, but eventually the market will level off. Accords aren’t struggling to sell, they are just selling in less numbers are more Honda buyers are opting for CRV, HRV, etc. In my opinion, the accord still is profitable. The Ford Fusion is selling much less than a few years ago, but at 200k per year it is probably still making a profit, albeit a smaller one. I don’t think it is so much as profit vs non-profit. I think it is more about projections. I think the bean counters at companies like Ford are measuring the success of a product based on projections. They “project” let’s say 500k units sold for a profit of $100M or X% market share; but end up selling 200k units for a profit of $40M and only Y% market share. They didn’t hit their projected sales target, therefore they see it as loss. But in reality they still did make profit on their product, just not as projected. Then that leads to product neglect, lack of adverising that product, and reduced demand, basically turning it into a self fulfilled prophecy. It boils down to perception. If any of this makes sense
To put it very simply for you: Profit and Loss is not counted per individual unit sold. It's calculated at different points: A line within a factory, the factory itself, the line as a whole, the business unit/division, the company as a whole, and at other parts in between those. The "Bean Counters" that you refer to know how many units they have to sell in order for a line to be profitable overall with all those different points taken into consideration. If Line X outperforms expectations and Line Y underperforms and does not move enough units to be profitable, the company will cancel Line Y and shift corporate resources from the cancelled line over to LIne X or will try a new Line Z.
And that isn't even getting in to sales projections and how missing sales targets and missing earnings ends up tanking the price of the stock, which has a massive impact on how well the company is able to function, draw in additional investment, etc.
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