02 May 2018

The Bean Counter

Bean counter: A person, typically an accountant or bureaucrat, perceived as placing excessive emphasis on controlling expenditure and budgets.

To me it means penny-pinching accountants who can't or won't see the bigger picture. How do they operate in the car industry? I see an example of this with Ford in the USA. The reason why I say that is that Ford US is making good profit, but wants to increase it and is going to move into the next phase of this drive by getting rid of its traditional passenger cars (except for the Mustang).

It's fate is sealed. The competition must be loving it

I understand that margins for cars are lower than SUVs and trucks so getting rid of cars will increase unit margins. Ford hasn't actually said cars sell at a loss, although that would be the only reason I would ever consider removing them from the range.

If this is such a good idea, why do manufacturers around the world still have a range of cars? Why aren't they all giving up on cars? Because money can and is made on cars. It also gets people into dealerships and once there, they can be sold something. People considering buying a car won't even go to a Ford dealership if there are none there.

On top of that Ford will still be developing and selling cars elsewhere, except now the cost will have to absorbed by fewer cars and therefore make them less profitable. It will speed up the time when Ford ends car manufacturing altogether.

I can see cars becoming increasingly marginalised but for now they do sell in reasonable numbers, which dealers benefit from, if Ford less so. Cars generate foot traffic. How many customers come in to look at a Ford car, and leave with a Ford SUV? Those customers will be lost. There is more to selling cars than "which model makes the most money?"

This is a classic case of the bean counter making decisions. They see the bottom line on an accounts sheet and from that deduce which vehicles they derive most of their profit from. They then only retain those ones. It sounds good in theory but is foolish in practice.

The day will come where manufacturers will question cars in their range. That day hasn't arrived, except for Ford North America. Because they have acted prematurely, expect Ford to suffer when it is implemented, especially in sales volume but they also won't reap the full benefit they think they will get as customer traffic falls away in Ford dealerships.

I see the whole US car industry in retreat. Everything is about cutting back. Pulling of of markets altogether, pulling out of certain ranges of cars. Focusing on models that are most profitable, likewise only interested markets that are making enough money. Rather than address how to improve a situation, they listen to a bean counter who recommends retreat. The shrinking US car industry is only going to shrink further by listening to such people.

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