Toyota Yairs, and the lack thereof

[BailOut]

Originally Posted by Kal-El

Subcompacts make such small profit margins that there isn't much room for dumping money into continuous ads.

You're onto something but I think that there's a larger picture.

Over the last 15 years, but especially over the last 10 years, auto manufacturers have found that they can pull much larger profit margins from larger and larger vehicles. During this time they became addicted to the profits these margins bring them, as did their shareholders.

Now they find themselves in the kind of trap that only greed can produce. People are starting to shift to a desire for smaller and more fuel efficient vehicles but if the manufacturers can't keep producing larger and larger profits each quarter their stock value begins to decline. This inevitably results in action from the shareholders via the board members in the form of replaced executives and upper management.

Every executive and upper manager is desperate to hold on to what they have today and have little to no regard for the future beyond a few quarters, so they do everything they can to keep the Tundra and Expedition and Yukon sales going even as they watch the market for them begin to wither.

It's not that the companies would go broke by selling only smaller vehicles with smaller profit margins. This is important to understand. They still make a profit - just not as much of it. However, this presents a problem for every publicly traded company.

Once a company goes public they simply must produce higher profits each and every quarter or suffer a lower market capitalization. Too many downward quarters and you find your company isn't worth enough to muscle your way around, or to demand credit, or to ease investor's fears, and this is when you're in deep trouble.

So the question is, with the inevitable shift to smaller and more efficient vehicles, how can a public company convince everyone that some profit is better than no profit even if each share's value is cut in half?