Interesting Info

Some interesting info I found while researching for the finance lab. I thought I'd share this with the group, since it wasn't really relevant to the project but could be relevant down the road:

Automakers disclose three important monthly statistics that indicate financial performance:

1. Motor vehicle production: This indicator shows how many units auto companies have produced in a given month. If production is increasing, auto companies may be spending more money to produce vehicles, hiring more workers, adding shifts to manufacturing plants, and anticipating greater sales volume.

2. Retail sales: This shows the amount of auto sales by a company’s affiliated dealerships. Greater sales volume can be compared to manufacturing volume to determine if a company is producing too few vehicles to meet demand or producing too many. In the first case, too few vehicles will raise the price (this was seen during the Prius’ heyday, when dealers would mark up the price due to high demand and low supply), and in the second case, too many vehicles will result in price reductions by both company and dealerships, leading to lower profits (an example is the large employee discount that GM gave to consumers to purchase GM vehicles).

3. Dealer inventories: This figure shows how many vehicles dealers have on hand. If cars are sitting on the lot and not selling, this not only hurts the dealer but also the manufacturer, by increasing manufacturer inventories and possibly leading to a reduction in production Automakers will also increase marketing efforts if a particular model is not selling as expected.