Further investment at Broady

[Brazen]

Originally Posted by dimka100

You are right, I did this simple calculation to try and work out the profit margin Ford would need to maintain for each Falcon sold just to pay off the R&D investment costs in to a significant model upgrade over a three year period.

I obviously do not know the average profit per Falcon sold (profit in this case being the revenue minus all manufacturing/marketing/sales related costs but excluding cost of R&D) so I used the following few numbers:

At $5,000 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $195 mil
At $7,500 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $292.5 mil
At $10,000 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $390 mil
At $12,500 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $487.5 mil
At $15,000 (profit per car) x 13,000 (yearly sales forecast) x 3 years (model life span) = $585 mil

So assuming that a decent model update would require an R&D budget of say 500million, with the current forecasted sales numbers of 13,000 annually, ford would have to make somewhere in the region of $15,000 per car once to cover the cost of R&D and make a tiny profit. Considering the cost of the Falcon, and that majority of cars are sold as heavy discounts to fleets, it seems highly unlikely that Fords margin per sale is anywhere near that region … hence investing such a substantial amount of money based on the current sales projections would absolutely make no financial sense. OFCS having the government chip in a whole bunch of money would change the balance, but it would have to be a pretty substantial chip in …

Volkwagen makes about $535 per car, Toyota which is really good for a mainstream car maker makes about $2700 profit on each car. I would assume Falcon would be a bit less than VW because of such small scale which makes car production expensive.