Re: Price fixing among manufacturers

The cost of building a vehicle depends on the drive type and the amount of materials as well as the assembly line time to put it all together. Contrary to what many believe it costs more to assemble a FWD vehicle than a RWD vehicle of the same size because of the off assembly line pre assembly required for FWD vehicles When Chrysler first began building small FWD cars they sold for as much or more than they larger RWD car they replaced. The line worker putting a front fender get the same pay, regardless of the MSRP of the vehicle. Material cost are by weight. When I was still at Ford in the mid eighties the cost of building a T-Car over a CV is less than $2,000 dollars yet the T-Car sold for $10,00 more. The cost a building a V6 Camry today is not much less than a V6 Lexus built on the same body. Toyota spends far less then GM on building their cars let a comparable Toyotas in size and equipment sells for 20% more. The fact is those that buy larger cars and trucks are subsidizing the sales of smaller cars, by keeping the MSRP down so that companies can met CAFE. If it were not for the greater profits earned by lager cars and trucks the price of small cars would be thousands more than they are. Look at Toyota, ALL of their growth over the past ten years has been in lager cars, SUVs and trucks, not in small cars. Toyota knows American buyer prefer larger save cars ant that has been what they are building. Today Corolla in larger than the first Camry but buyers buy more Camry than todays larger Corolla

When GM introduced the Saturn line of cars they set up an entirely new network to build and sell the vehicles. The reason was to determine the true cost of building a small car in the US and still earn a profit. GMs economies of scale were so low they could not determine the true cost of any of their brands.

When they teaching economies in colleges Procter and Gamble and Bethlehem Steel are two companies that are referenced in teaching economies of scale.

When Procter and Gambel fist developed detergents to clean close they based the selling price on the cost of making Duz Soap. When they stopped making Duz they discovered the same economies of scar did not transfer to detergents. Bethlehem steel made the finest Tool Steel in the world. When the bean counters considered the cost of spending billion to make the process meet up coming environmental laws, they got of the Tool Steel business because the profits would not be support the costs. Within a year the cost savings they expected never materialized and the discovered they were making much more profit on tool steel they thought.

"Tony Harding" wrote in message news:477c1bdd$0$9142$ snipped-for-privacy@cv.net...

Jeff wrote: >> Edwin Pawlowski wrote: >>> "Jeff" wrote in message >>>>> For most things we buy, the cost to produce an item has little to do >>>>> with its selling price (companies don't spend billions on advertising >>>>> every year for nothing, after all) >>>>> >>>>> >>>> I would like to see your evidence for this. >>> >>> >>> The evidence is all around you. Look at the clothing and cosmetic >>> industry. Then stop off at the jewelry department. It is common in >>> those business to have a dealer offer goods at a certain price, then ask >>> what selling price you want them tagged and the variation can be 500%. >>> How about the cost of making a bottle of beer or wine? >>> >>> I know a craftsman that makes a wood product. He started selling a >>> particular box for $50. When the demand went up, he raised prices to >>> $100 and found ways to cut the production time from two hours to 30 >>> minutes. Do you think he is going to lower his price? >> >> Those are particular businesses. In other businesses, like most >> utilities, energy, cars, computers, most services and many food >> industries for the cost to produce a product to be closely related to the >> cost at which a product is sold. > > So it costs AM General 5x as much to produce a $100,000 Hummer than it > costs Honda to produce a $20,000 Accord (hey, back on topic!)? > > You must be aware why the US automakers loved selling so many SUVs these > past several years - enormous profit margins. It obviously doesn't cost > twice as much to produce a $40,000 SUV than it does to produce a $20,000 > sedan. > >> Even in each of those industries, the cost of a product has little to do >> with the selling price (the cost of a 32 oz of soda that is sold at a >> fast food restaurant is less than 10% of what the restaurant gets for >> it), but for most industries, the cost of producing a product is a major >> determining factor in the cost of the product. Otherwise, more and more >> people would get into making the products, ultimately driving the cost of >> the product closer to the cost of producing the product. > > This is fine in Adam Smith's world of free entry/exit from a business, no > other barriers, etc. The real world is quite different, of course. What > might be the startup cost for bottling soda, or opening a new car > dealership, etc.? > > There are some highly competitive industries, of course, e.g., the > commoditized PC business that you mentioned, which is why I didn't say > "all" in my original post. But even in the personal computer business, > laptops and Apple are exceptions. > > Finally, please don't claim any significant advantages to the consumer > from any putative competition in the oil & gas industry - Exxon Mobil > hasn't posted record profits the past few years because they're cutting > prices to the bone. > > The recently retired CEO of Exxon Mobil had an attractive retirement > package, of course, in the neighborhood of $400 million. > >
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Reply to
Mike hunt
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any putative competition in the oil & gas industry -

cutting prices to the bone.

Must be extremely thin skin for gasoline is over the $3.00 mark. I remember in the '60s the "bone" was about forty cents a gallon.

Reply to
Shawn

Record profit come from record sales. Americans are buying more gasoline and other oil based products than at anytime in our history. They are buying more gas a $3 a gallon than they did when it was only $1

Reply to
Mike hunt

Actually, compared to last year, gasoline demand is almost the same this year. And per capita demand is down (the population is up).

Gas was about $1 a gallon in 1995. Between then and 2003, 1995 and 2003, per capita gasoline consumption was essentially flat (up about 0.1%).

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The greenhouse gas emissions per capita has remained essentially flat at

24 ton per person in the US between 1990 and 2003.

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This makes me think that people got more energy efficient overall.

Jeff

Reply to
Jeff

You always like to pick and choose points in most posts so you can make a comment on most every post. What I said was, Americans are buying more gas at $3 a gallon than they did when it was only $1 That is a fact, even of it was only up about 0.1% FIVE years ago. One percent of millions of gallon is a $#it load of gas. Try reserching the total amount of gas consumption in the US. LOL

Reply to
Mike hunt

other oil based products than at anytime in our

And per capita demand is down (the population is

capita gasoline consumption was essentially flat (up

ton per person in the US between 1990 and 2003.

More likely why my 2004 Ranger only has 21K on the odometer. Too expensive to drive any distance & since I'm disabled, I have no daily commute to deal with.

Reply to
Shawn

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