bertsmobile1
Lawn Royalty
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- Nov 29, 2014
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That is exactly how it goes when you send a business down the high volume low mark up routeThe funny thing is most of the fall of the US small engine manufacturer and various products all circles back around to the bankruptcy of Murray. Murray was a large user of Tecumseh engines With the purchase of Murray by Briggs set up the issue of MTD seeing Briggs no longer as an engine supplier but as a competitor, which ushered in the MTD powermore engine line.
Most of the small engine manufacturers have a much larger main business like Honda with their auto and powersports lines. Subaru with the auto line. Kohler with the plumbing fixture line. Tecumseh in the small engine world was known for their engines and transaxles but were actually a very large manufacturers of compressors for refrigeration systems. Briggs at one time was a large manufacturer of automotive parts.
only takes one hiccup and the whole lot collapses in a heap
As for MTD it was more likely they were looking for an excuse to source cheaper engines rather than their hand being forced.
And stupidly B & S fell for the threat hook line & sinker.
Had they kept Murray then they probably would not have been bankrupt twice since then.
Manufacturing , as compared to assembling requires a lot of capital invested in machinery and even more in R & D
When we entered the period of shareholders calling the shots and shareholder greed demanding higher returns businesses that used to manufacture dumped that side in order to liberate capital ( to pay the the shareholders as dividends ) .
At this time the P:E ratio became the sole criteria for boards in order to maintain the share price they had to show a better return on capital.
Down side of this was manufactures then only had the single source of profit, the difference in value between a pile of parts & the assembled item , which is a lot less than the difference between a pile of raw materials & a finished component ,
Thus the real percentage of the profits per item sold actually reduced so requiring a larger slice of the market to maintain cash flow .
It is the single most stupid management theory to have come out of Princetown University ever , but the theory of " contraction to your core business" ripped through world markets faster than Covid 19 and the planets financial institutions were awash with cash from selling off "non core assets" which pushed up share prices & generated lots of income, for a select few .
However eventually there was nothing left in the box to sell off and the capital supply went big time into flakey financial products which of course ended up in the GFC.
Sims Metal became the worlds largest scrap metal company because scrap metal ended up being less than 1/3 of the total business as in every boom time Albert G Sims bought out more of his supply chain including all of the land his plants sat on and then diversified into things like underpants , TV's , chemicals, glasswear , agricultural equipment , railways, radio stations , travel agencies, work clothes, spectacles , etc, etc etc to the point I could run almost any business and use nothing from outside the group .
Unfortunately they got taken over by Geo Peko ( former version of Peko Wallsend ) when the ranger uranium discovery pushed up the 50¢ shares to over $ 100
and they installed their freshly minted USA Princetown educated graduate who immediately broke the business down & sold off all of the "non core" assets to provide dividends to the Peko shareholders till the mine was actually in operation many years latter .