AD #1671 – Net Profit Margin Ranks, Brake-by-Wire on the Horizon, Scion Cuts Dealer Time

August 3rd, 2015 at 11:52am

Runtime: 7:43

- Nokia Sells Map Business
- Scion Cuts Dealer Time in Half
- Honda Posts Strong Earnings
- Net Profit Margin Ranks
- Brake-By-Wire on the Horizon

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52 Comments to “AD #1671 – Net Profit Margin Ranks, Brake-by-Wire on the Horizon, Scion Cuts Dealer Time”

  1. Tony Gray Says:

    Boggles the mind why anyone would want to get into the grocery business. The hours are insane and, as you point out, the profits are dismal.

  2. Lex Says:

    Brake-by-Wire, something else Hackers can mess with!

  3. Steve W Says:

    #1~~~~Great cash flow with no accounts receivable.

  4. GM Veteran Says:

    In some previous articles, you have ranked mfrs by their investment in R&D. I would think with the money being invested into the revitalization of Alfa Romeo, the minivan and large crossover, other FCA models around the globe and powertrain that they would compare very favorably with other OEM’s.
    It would also be interesting to compare Operating Profits to other companies, as it is widely accepted as the best indicator of how well a company is performing. I believe I have even heard that from John on one or more occasions. Net Profit holds little value for comparison. Ask any Wall St. analyst.
    Still waiting for the explanation of why a low Net Profit is the reason Sergio is looking for a merger partner. With the Operating and Revenue numbers you reported last week, it simply tells me that FCA is investing heavily in plants, equipment and new models (like an entirely new and expansive line of luxury sports cars – Alfa Romeo). Once that line is in place, and assuming it sells fairly well, the Operating Profit numbers will look even better (Net Profit probably won’t because they will still have a LOT of debt service to address).

  5. Bradley Says:

    “BRAKE-BY-WIRE ON THE HORIZON”

    When will the Omni get BRAKE-BY-WIRE?

  6. Next Says:

    Brake by wire is just another step closer to autonomous driving and zero accidents.

  7. HtG Says:

    If Nokia’s owner, Microsoft, allows the HERE mapping tech to be bought by some carcos, what does Microsoft know that they don’t?

    btw, I use the HERE app to look for jams on the highway, and it’s pretty good.

  8. Chuck Grenci Says:

    Brakes and steering, connected for me, thank-you. I don’t believe the speakers arguments could ‘hold water’, i.e., earlier mentioned, hacker’s dream, electrical failure (can’t even stop), etc., etc.

  9. Wim van Acker Says:

    Sean: as to your remark “the same profit margin as the average grocery store”.

    First of all, you can’t know the profitability of a “grocery store” because those are small privately held companies which do not share their financial results with you. Assuming that you meant to say “retail chains”, you may want to look further:
    1 retail chains like Walmart and Kroger have consistently posted Returns on Equity of >20% per year and >30% per year, respectively.
    2 OEM’s have yielded Returns on Equity of a little over 10% per year (FCA <10%, Ford 12-14%, GM 12-14%, VW 12%).

    I suggest to be more positive about retail chains. Personally, I would rather make 25% per year on my investment in a retail chain than barely half that, and then only during the good times, on an investment in an automaker.

  10. Enn Norak Says:

    I’ll warm up to brake-by-wire when I am convinced that automotive by-wire systems are built to aerospace reliability. I love the idea of eliminating brake fluid that absorbs water and fluid lines that can corrode;however, for now I would require some sort of mechanical back-up in case a weak link in the electronic system fails.

  11. Druff Says:

    HERE maps is pretty much the map system in most cars and potable gps systems, does this mean the three companies can control who gets them now?

  12. pedro fernandez Says:

    Any “smart” dealer should adopt this Scion idea, going to buy a car should not be haggling 5 hrs for price and then for financing and all the crap dealers try to unload on you, so many dealers are guilty of this, locally, I see certain dealers advertising an internet price which you know cannot be, because it’s thousands less than all others, so you wonder what BS story they’re gonna have for you when you get there after driving 2 hrs?

  13. Rob Says:

    So did the Scion web site just move 2 hours of dealership time to time on the computer at home. I mean you still need to find the make and model place all the options and the find a dealer that has the car you’ve built. Which many other manufacturers already have that capability. So all your left with is haggling on a price and the pressure of extended warranties.
    I would have like to hear how much time was spent on the Scion web site if they still spent 2 hours in the showroom.

  14. Rob Says:

    Brake by wire systems. Another advantage, obviously a ways down the road but rarely mentioned will be the ability for police to stop a car chase with electrical impulse or hacking like techniques.

  15. HtG Says:

    test

  16. HtG Says:

    nope

  17. MJB Says:

    #9.

    MMmmmmm… I don’t know about that, Wim. I just Googled ‘super market profitability margins’ and came up with an average of between 1.91% and 1.96% – With national chain Kroger floating at around 1.77% Organic food markets seem to fare much better – close to the 4% mark.

    And isn’t ROE (return on equity) something used to measure the return of shareholder investment? I don’t think that’s the same as profitability.

  18. Wim van Acker Says:

    #17. Yes, Sean already mentioned those net profit margins.

    Sean’s point on the show was that FCA’s low 1% net profit margin is like those retail chain net profit margins. My point was to show that those same retail chains are much better businesses than FCA, because their ROE (Return on Equity is more than double FCA’s. And on average twice as much as the other OEM’s I mentioned.

    The automotive industry is very capital intensive. Large retail chains are much less capital intensive. Those have relatively little inventory, immediate receipt of cash while suppliers are paid later. So completely different businesses. Challenging in their own right. Therefore comparison of net profit margins of two very different types of businesses does not make sense, IMHO.

  19. G.A.Branigan Says:

    @ 14,Rob: If the cops will have that technology,so will the nefarious types.

  20. John McElroy Says:

    18. Wim, on tomorrow’s show we’ll have some net profit margin comparisons to other industrial companies.

  21. HtG Says:

    20. Does the auto industry pay more or less for capital than other similarly sized sectors?

  22. MJB Says:

    #14 & 19.

    I think this tech could certainly lend itself to terrorist activity. You know, cause massive freeway pileups from applying the brakes of just a few cars.

    Car-jackings would also be made much simpler with assailants using that tech. However, something tells me that people who are bright-enough to come up with these types of hacks are going after much bigger targets than the latest model Escalade…

    Heck, if these hackers really wanted to cause mayhem for mayhem’s sake, they’d just hang around jamming the brakes at an F-1 race, right?

  23. HtG Says:

    22 This sounds like a good argument for having data loggers on our increasingly more ADAS vehicles. Consumers may be more willing to give up control to the algorithms if there was a record kept of what went wrong. Not sure if the carcos would be willing to have this ‘body cam’ installed. They might catch some liability. ;)

  24. G.A.Branigan Says:

    @ HtG: That is a good idea.

  25. T. Bejma Says:

    #10 and all of the “By Wire” doubters:

    Throttle by Wire has been the norm in the industry for several years (I am pretty sure you can’t even buy a car that still uses mechanical throttles) and it has been extremely reliable. I wouldn’t worry about the others.

  26. HtG Says:

    HERE

    Sean said that carcos were keen to capture the value of an app like HERE. What I’ve been learning is that, indeed, it’s in the analysis of the data in ‘datacenters’ where future value is expected to be found. The sensors which will spread out across the world will be cheap things, like 10 cents each, and do some local processing but taking in all the data and finding profitable patterns, that’s where the action is. Will carcos be able to compete with Google or IBM? I doubt it, but they may be able to sell their data to them!

    I can’t believe I am writing this stuff on ALD.

    24 Thx, GA

  27. T. Bejma Says:

    #19

    Onstar equipped vehicles already have the ability to be stopped by Police.

  28. G.A.Branigan Says:

    More hacking possibilities:http://sanfrancisco.cbslocal.com/2015/08/03/feds-popular-intravenous-pump-can-be-hacked-warning-issued-to-hospitals/

  29. Enn Norak Says:

    On the subject of comparing the net profits of various auto manufacturers, I am more concerned about long-term survivability in a volatile environment. Using clever accounting techniques, profits can be shifted from one period to another, often motivated by the bonus provisions available to top executives who are not necessarily wedded to a particular company for the long term.

  30. Rob Says:

    @25 I’m not a doubter and actually was a Lead Manufacturing Engineer for an electronic gas pedal manufacturer back 15 years ago and launched the CTS and Trailblazer programs. There are many advantages to the technology but issues like the run-away Prius which may have been a glitch or floor mats (never did hear the final root cause) will always be a concern.
    Obviously the carcos will have to seperate the drive by wire systems from any conductivity that isnt directly connected.

  31. MJB Says:

    Ultimately, I don’t really believe there is any threat to public safety with any ‘by-wire’ function.

    Any time a single entity steps forward with proof that a hack ‘CAN’ be successfully carried out, the general public takes that to mean that it ‘WILL’ be carried out (on a large scale and that they specifically will be targeted).

  32. Kit Gerhart Says:

    29 I have my doubts that there actually was a run-away Prius, but if there was, it makes a very good case for hydraulic, rather than electric brakes. A good hard push on the brake pedal wouls stop not only a Prius, but a much more powerful car with a “stuck throttle.” With brake by wire, the brakes might be stuck “off”.

  33. HtG Says:

    At least one of those runaway Priuses zoomed out a driveway, crossed a street and hit a stone wall very near me a few years ago. It was determined that the older female driver had been at fault for having confused the gas and brake pedals. At the time I couldn’t resist going to the scene. I noticed that on the wet dirt at the side of the road in front of the wall there were no tire marks which might indicate braking. I think the car was launched, if that’s possible for a Prius.(no offense, Kit ;) )

  34. MJB Says:

    31.

    I’m not nearly educated enough on how by-wire systems work, but your point does raise concerns.

    For example, what type of system failure might cause a by-wire function to fail? Loss of power? Blown fuse? Also, what are the chances of such a failure occurring vs. the chances of hydraulic failure?

    The interviewee mentioned an important point – even when by-wire is introduced, hydraulic braking would remain in place for quite some time as a backup. So weight savings will not be realized until a substantial enough period of time has passed to prove the long-term reliability of brake-by-wire.

  35. Bradley Says:

    #7

    Microsoft never owned the mapped part of NOKIA. That was kept as a separate entity.

  36. MJB Says:

    33 cont.

    …which might be a VERY long period of time (if ever), given the litigiousness of our society.

  37. T. Bejma Says:

    #31 – Kit

    You are assuming that the hydraulic braking system can overpower engine power, but in the case of several of the Toyota vehicles, that was not the case…

  38. HtG Says:

    36 I imagine that if a driver doesn’t really stand on the brakes initially, then the brakes can fade and lose stopping power. They heat up, the fluid boils. Of course, I know you know this TB, but I’ve been skeptical of statements that brakes always overpower motors.

  39. HtG Says:

    34 re 7. Thanks, Bradley. I missed that.

  40. Kit Gerhart Says:

    36, 37 I’d heard that in one or more cases, people tried to control speed with the brakes, rather than stopping. Yeah, if you have, say, a V6 Camry running full throttle, and try to use the brakes to go a steady 50 mph, the brakes will get very hot in a short period of time. You need to brake hard, and get the speed down quickly in such a situation.

  41. Kit Gerhart Says:

    I wouldn’t want to count on brakes overpowering the engine of a Hellcat Challenger, even doing exactly the right thing with the brakes.

  42. MJB Says:

    37+39 Would electronic braking eliminate this concern (of brake fade and whatnot)?

  43. Bradley Says:

    #39

    Yea, there is plenty of brake power. It is a misconception that it takes a lot of brakes to stop a speeding engine. It will stop with very little brake power, even if the engine is rev’n.

    Now stopping in a short distance is a different question.

    I had a 7hp lawn mower that had a single 1.5″ diameter rotor brake. One brake, not one on each wheel.

    It was more than enough braking power to keep the mower from moving even at max throttle.

  44. Kit Gerhart Says:

    Braking at high speed converts a lot of energy into heat. If an engine is producing 200 hp, and that power is counteracted by brakes holding the car at a constant speed, the brakes are producing heat equal to over 1000 100 watt light bulbs.

  45. Kit Gerhart Says:

    That makes brakes fade quickly, and boils fluid. You need to stop quickly in a “stuck throttle” event.

  46. Rob Says:

    MJB n the electronic braking just applies the same braking material against the rotor and will stil be subject to fade, warp, etc etc.

  47. Rob Says:

    MJB continued: Only difference to to my answer would be the electric vehicles that utilize regenerative braking.
    Also if they did require a hyd back-up system they might see some savings as they might only need to put the back-up system on one axle (I would prefer front) similar to to your emergency brake.

  48. Rob Says:

    @43 I think when people refer to the brakes being able to overpower the engine they envision that from a dead stop incidentally “power braking” the car which most cars can do with few exceptions. However get the car moving down the Hwy at 60mph and apply the brake while at full throttle and not only are you trying to slow down 3400+ lbs but also overcome the engine. Brake fade can happen quick and soon they feel like stepping on a sponge with little effect in speed.

  49. ukendoit Says:

    #5, Bradley) re: Horizon/Omni; I have the same sence of humor, thanks, I appreciated that one.

    re: Redundant brakes, wouldn’t a mechanical brake (like a cable hand brake) be better for a redundant braking system (that should never have to be used) than a complex hydrolic set up that would add a lot of weight and still need to be regularly maintained with the hydroscopic fluid?

  50. ukendoit Says:

    *hygroscopic

  51. RumNCoke Says:

    HATE electronic parking brakes. Why can’t they make a progressive one instead of on/off? I guess with the death of standard transmissions, nobody uses them for anything but, um, parking anymore.

  52. Rob Says:

    RumNCoke, Makes it harder to drift a car ahe?