http://www.reportonbusiness.com/serv...discussion1025

Pages of BS. Only thing that worth reading is the comments from the readers.

 

Towing the company line ....

... while the line forms at the border, importing US cars ...

 

wow, he should be in politics! He managed to skirt every question. Every dealer I've spoken to in the last few weeks has told me they get an average of ten calls a day asking if they will match prices from the US, so the problem will not go away with such witty repartee.

 

One thing to bear in mind:

As we demand & receive equalised pricing on future cars, it devalues every one we own now.

Ian

 

The only thing that corporations understand is when sales drop.

He states that sales in Canada are up 20% so why should he give a **** about equalizing prices.

This is not just a car issue it is books, clothes, applicances ... just about everything.

A majority of Canadians live by the border. The retailers are not really seeing the full impact of the high dollar yet. They just might by January 2008 when hopefully they have the worst Christmas season in history.

It will take a lot of dealers to either go out of business or lose a ton of money before the correct amount of pressure can be brought to bear against the manufacturers.

From what I can see the high Canadian dollar is here to stay for a year or two. I would not be surprises to see some sort of tempory drop in exemption levels proposed by the Canadian to stop cross border shopping.

I was looking for some Blizzak snow tires for my wife's QX56. US price US$134.00 vs. Canadian price in BC CAD$294.00 more than double. I guess that in Canada we get $160.00 worth of better options, better service, better rubber etc on those tires.

 

It could also be that the big retailers are expecting US prices to start increasing as they import a lot of stuff from overseas. Their dollar drops so anything they bring in from China will be more expensive. Our dollar has stayed more or less the same when compared to other currencies and thus we might not see too many changes in the long run.

 

Two things drive me nuts about this debate:

The way people conveniently forget the economics of sovereignty. It's a market a tenth the size, which demands its own sales and service infrastructure. Companies don't survive on unit margins, they survive on gross profits. Meanwhile, I don't think most Canadian businesses would really enjoy competing with their US counterparts on price across the board. It would be very tough on the economy, very tough on our way of life. This is a very comfy country to do business in, though expensive.

And the fact that we aren't going to be par dollar forever. Best guess is that it will sink back into the low 90s by next year. The fundamentals just don't support the current rate. So, what then? Prices go back up, and you're okay with that? And why wasn't everyone up in arms when it went from 78 four years ago to, say, 92 last year? That was a much bigger jump (I'm sensitive to this stuff because I do 40% of my business in the US). The par barrier was psychological.

Everybody wants their cake and eat it too. But it never works out that way.

 

Ian, our cars have already been devalued. Leasing
Companies, direct to the public wholesalers are bringing thousands of cars in from the US. Porsche Canada has dropped prices. Others will have to follow.

 

I worked on contract at Ford of Canada for 3 years. I used to see the sales numbers. The state of California sells more vehicles that the entire country of
Canada.

The manufacturers are aware of the price difference, but the volume of sales they will lose if people buy from the states won't hurt their bottom line. They have to give the appearance that they are protecting dealers in Canada.

I have enough relatives in the States to buy cars when I am ready so I'm not concerned.

 

Mercedes-Benz just announced $500-$7,500 rebates to buyers of it's cars here in Canada.

 

Bruce P:

I don't think that people are not aware of the cost of doing business in a small country like Canada. In fact Canada is not a comfy country to do business in ... I know I'm a Chartered Accountant and I am well aware of the compliance costs. I am also aware of the increase costs related to the size of our population vs. the size of our country.

What I also know is that the majority of our products are manufactured and distributed by international public companies that have sales and service structures on an international scale. How does one justify a 55% difference in price or $160 on a $290 tire that is manufactured in France? Is this the economics of sovereignty to which you are refering to?

One of my client's is a tire wholesaler and his Canadian cost is more than the US retail price. Now he has to pay 6% duty as it is not covered by the free trade agreement but that cannot account for a 50% price difference.

fdss is probably correct in his opinion that while the manufacturers are aware of the price difference the volumn of sales that we are dealing with in Canada is insignificant. Anyways whether we buy in Canada or the US they still untimately get the sale.

 

The flaw in your tire argument is that the dollar hasn't appreciated nearly as much against the Euro, if at all.

Actually, I wasn't speaking primarily about compliance costs. My argument was about the volume available to support sales and service infrastructure. The cost of running most kinds of companies does not rise in linear proportion to sales volume. Quite the opposite.

Finally, my comment about Canada being comfy had to do with the nature of competition here. In the US, in most product categories, competition is brutal, fast, and very likely to focus on price. Here in Canada, again in most categories, it's more leisurely and more marketing driven. Remember, the people who buy cars here also have to work here. I just wondered, in my previous post, whether we'd all like working in the kind of environment that produces cheap Porsches, quality of life wise. I know I wouldn't. Or I'd be there now, given that I'm a dual citizen and do a lot of business down there now. It ain't so bad here, and that comes at a price.

 

Bruce:

You are right the US dollar has dropped against the Euro while the Canadian dollar has kept pace ... so the US retail price should have gone up and should closer to the Canadian price but that hasn't happened. It appears that the pricing strategy has no real basis to actual exchange rates.

With respect to overheads vs. volume a lot of companies do not even have sales or services infrastructures in Canada. My tire wholesaler has a lot of their product shipped directly from the US but sold to them at Canadian wholesale prices. All of the service and marketing is done by them. That explains why my client would require a higher markup but doesn't explain the difference in wholesale price.

 

I think with a lot of importers, your beef would be with the accounting practices, which seem pretty arbitrary a lot of the time. But if a Canadian sub is set up as a separate P&L from the parent, and is required to buy its inventory in Euros, and happens to peg its rate for the year at an unfortunate moment, you can see how street pricing wouldn't have much of a chance to fall. I've seen this done all kinds of ways. I have a client now who has to buy product in Euros. I've worked with a Japanese client who made the Canadian sub buy inventory in US dollars rather than yen. On and on... and, as you well know as an accountant, your pricing can't float with the exchange rate. You have to peg a rate for the fiscal, and then account for FX gain/loss at year end. If you were buying in US dollars in the last four years or so, you got a windfall at year end, but you couldn't plan for it. And if you were selling in the US, as I do, you got screwed at year end by the same token.

In Porsche's case, I think that Canada is a US sub and buys in US dollars. So they should benefit from the exchange. But that assumes that the US parent is pricing Canadian and US inventory the same way. I've seen it happen where small markets are held to higher margins to support US pricing practices. That could be the case here, in which event it's PCNA you should be mad at, and not the Canadian sub or its dealers. When you really dig into it, a lot of pricing discrepancies trace not to the greed of local distributors but to the accounting practices of their parent companies.

Anyway, I'd like a cheap Porsche as much as the next guy. It's just that, as a business person, I have a hard time with the ultra simplistic way the press covers this stuff.

 

Hey Bruce you're absolutely right on. I have no beef at all with the Canadian distributors or retailers. They are caught in the middle of this. The only thing that they can do is to put pressure on the manufacturers to adjust the prices with either a reduction of the wholesale price or more likely with rebates, advertising co-op payments etc. I see this all the time especially with camera dealers.

The unfortunate thing is that due to the size of our market there is no real incentive on the manufacturers to listen to the Canadian dealers.