Bigger is not always better...Wait til the bottom of this car sales bubble really falls off... Overhead will be a killer...
The Company's ability to moderate the effect of reduced sales activity is encompassed in the variable cost structure. However, such reductions are not immediate for several reasons, including: (i) the acceptance of lower vehicle sales margins to stimulate unit sales to achieve manufacturer sales-based performance targets; (ii) higher than normal per unit advertising cost due to reduced volume; (iii) inventory carrying costs incurred to support forecasted stronger sales volumes in excess of actual sales volumes; and (iv) the industry practice of paying advances to top-up the incomes of front line key sales staff in order to retain key individuals.
orepass