A weaker US dollar
For those companies exporting to the US a weaker dollar obviously has negative consequences. Just how much so could be seen in a recent Wall Street Journal article.
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It stated that “Since hitting a peak in February 2002, the dollar is down about 28%, according to an inflation-adjusted index from the Federal Reserve based on the values of a wide variety of other currencies.” (If you look at the previous peak in 1985 today’s dollar is down over 50% compared to then). At least one European boatbuilder is taking advantage of the currency realignment. Soundings Trade Only reports in its July edition that “Holland, Michigan based S2 Yachts, the builder of Tiara and Pursuit powerboats, is going to be the builder for Netherlands-based Zeelander Yachts. S2 will build the Zeelander 44, a U$1.2m pod-driven luxury dayboat, for Zeelander’s international and domestic markets.” A weaker dollar is good news for US manufacturing companies. The NMMA’s 2010 Recreational Boating Statistical Abstract shows that total exports of engines and boats increased from U$ 932m in 2002 to $2,164m in 2010. Engines increased from U$ 332.4m to U$ 425.7m while boats increased from U$ 600.5m to U$ 1,738.8m. A weaker U$ can also be an advantage to exporters to the US if they rethought their current distribution strategies. A good percentage of a product’s retail selling price in the US is distribution cost – primarily dealer and distributor mark-ups. The combination of the internet, 3rd party fulfilment services and rapid delivery provides a viable option to this classic distribution chain. A company that utilised this option would keep their retail prices down in today’s market environment thus maintaining or increasing current sales. They will make a killing if and when the dollar strengthens. |
