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Sedans High End Luxury Cars
24700 messages, Last post on Dec 01, 2009 at 12:24 PM
You are in the Sedans Forum. Your Hosts are pat & karens
Let's try to define this forum as being limited to luxury performance vehicles where the mainstream version in a typical configuration has an MSRP of at least $60k.
A luxury vehicle with a base price of $59k qualifies because it would typically be bought with some additional equipment, bringing the MSRP over $60k.
Vehicles like the E, 5, A6, M, or GS, even if available in certain versions over $60k, don't qualify because they are cars from companies that have higher end cars in their lineups.
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Replying to: brightness04 (Mar 24, 2007 9:33 pm) This is the nut of what I've been interested in discussing for quite some time. It'll be interesting to see how it all turns out.
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Replying to: cdnpinhead (Mar 25, 2007 5:12 pm) As you said, it'll be interesting to see how it all turns out... in the future. Good point, cdnpinhead. TagMan
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Replying to: mariner7 (Mar 25, 2007 2:13 pm) I have been pointing at the rat hole for some time: subsidized leases. Look at the link to BMW AG's 2006 annual report, provided by Dewey, and you can find confirmaton right there. Read the details for yourself. Here are some gems buried in the pages: "The main factors behind the increase on the assets side were the increased level of leased products (+19.9%), financial assets (+19.8%) . . ." ". . . the total carrying amount of leased products increased sharply by 19.9% . . .. Adjusted for changes in exchange rates, leased products would have risen by 29.9%." What does that mean? Well, when someone leases a car from BMW, the company sells a car to BMWFS for the nominal transaction price that the consumer never really pays. It's chalked up as a sale, and booked as profit. The full residual amount plus the yet unamortized amount is put in the books as assets. In other words, the company is selling cars to itself and booking as profit for every sale. No wonder the "leased product financial asset" is mashrooming. No wonder cash flow is down despite increased "sales." No wonder liquid asset is down despite 6 billion Euro bond issuance. Just like we found out in the dot-com bust, sales and profits can be faked with vendor financing. Cash flow and liquid asset are much more accurate guages. BMW is essentially turning cash into lease returns that can never fetch the residual asset value in the books. |
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Replying to: tagman (Mar 25, 2007 6:27 pm) In order to cover the residual asset write-downs at the back end, the company has been forced to market more and more lease deals at the front end in order to have the new book sales and book profit to compensate the profit short-fall created by the write-downs. It's like a hamster on a wheel, forced to peddle ever more furiously. The lease deals have to be made sweeter and sweeter to get new signatures. Consumers notice this too, and lease vs. buy per centage become lop-sided. That's why we are seeing a mushrooming of leased-product asset in the balance sheets, accompanied by declining cash flow and declining liquid asset despite increasing "sales." The process is already quite far along.
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Replying to: brightness04 (Mar 25, 2007 12:15 pm) No I did not even have the priviledge of reading the 2006 BMW headlines this morning. I didn't even know the 06 results were out until today. LOL Brightness is this the basis of your doom and gloom prophecy for BMW? Cash flow is down 13 percent? Cash flows in all companies fluctuate since they are not smoothed by accruals. You got to look at the average Free Cash Flows (CF from Operations -Cap EX) in the last few years to find out how a company is performing. And the average Free Cash flow yields of BMW are nothing short of being amazing. Liquid funds fell 8 percent? Yeah so? What does that mean anyways? Most companies with good cash management try to reduce their cash balances. There is an opportunity cost in holding liquid assets. Increase in financial derivatives? Yeah so? Good risk management involves using derivatives to hedge currency, commodity and interest rate risks? Where oh where is this doom and gloom you are talking about? Leased products increased significantly? That's wonderful! Especially when it is profitable: The Financial Services segment continued to grow profitably in 2006, again making an important contribution to the overall performance of the BMW Group. The business volume of the segment in balance sheet terms rose by 8.9% to euro 44,010 million. Adjusted for exchange rate impact, the increase would have been as much as 14.4%. At the yearend, 2,270,528 lease and financing contracts were in place with dealers and retail customers, equivalent to a growth of 8.8% in comparison with one year earlier. The proportion of new cars of the BMW Group leased or financed by the Financial Services segment was 42.4 %, 1.3 percentage points above the proportion recorded in 2005. Regional expansion continuing The business activities of the Financial Services So Brightness according to you BMW leasing activities are equivalent to Enron's activities. LOL you are funny! Oh and did you notice how their Returns on Capital and gross margins increased ? Naaah I didn't think you would. Next time Brightness look at the bright side of life instead of the darkness. Apparently you cant see too well in the darkness 
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Replying to: mariner7 (Mar 25, 2007 2:13 pm) Here in Canada our Government is imposing hefty taxes on gas consuming performance cars . I've a feeling that Canada will not be alone with these kinds of taxes(Governments always try to find new excuses to tax their constituents especially when guilt is involved---cigarettes, alcohol and the newest of sins called gas consumption). Not good news at all if you are sitting in BMW's boardroom.  |
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Replying to: brightness04 (Mar 25, 2007 6:51 pm) The high returns on capital for BMW refutes your notion about leases. High and healthy returns on capital and a disasterous subsidized lease program are contradictions.
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Replying to: dewey (Mar 25, 2007 7:12 pm) The Financial Services segment continued to grow profitably in 2006, again making an important contribution to the overall performance of the BMW Group. BMWFS is paying 5.5% to its savings account customers in Europe, and even higer on bonds, yet collecting only 3% or less on most US leases. Obviously it's not making profit when dealing with consumers. So where is the profit coming from? Well, we know that from the Annual Report: 19+% increase in derivative values. Is that Yen or Euro or SwissFranc carry trade? Talk about poor earning quality and a house of cards! Returns on Capital and gross margins numbers can not be trusted when the "sales" and "profits" are based on sales made from BMW to BMWFS; in other words, self-dealing, with "leased-product asset" taking place of hard cash from consumers.
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Replying to: brightness04 (Mar 25, 2007 7:35 pm) Cash flows at BMW are healthy. Cash flows are as uncooked as a platter of raw sushi and sashimi. Unless you want to accuse BMW of doing what Ernie Ebbers did at WorldCom (he played around with cash flow numbers and is now serving a quarter century prison sentence). In fact it would not surprise me if you would make such an accusation about BMW.
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Replying to: dewey (Mar 25, 2007 7:30 pm) Cooking books result in higher profit number, and therefore higher return on capital. That's the purpose of book cooking.
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