2008 3
Why do many in America want to save all of the Big Three?
Published by MartinVarsavsky.net in Micro with No Comments
Why do the Big Three automakers lobby together and be saved together? If the problem is over investment, or lack of demand, wouldn´t it be smarter to save two out of the three? If one goes under the other two are automatically healthier. And then the opposite is true. Saving three is costlier and more risky so sentiment maybe so negative that then none are saved. That would also be a mistake.
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Carlos on December 3, 2008 ·
Sving includes management change. It s not clear that the people that have been ignoring competitive dynamics for the last 20 years are goint to do better with more money to loose.
Elliott on December 3, 2008 ·
I’m not an expert on the travails of the Big Three [if anybody were they wouldn’t be ready to collapse], but it has been claimed that if one of the Detroit automakers were to go bankrupt it would force the bankruptcy of numerous parts suppliers that supply all 3 of the automakers. Bankruptcy rules generally require all payments made within the 90 days previous to the filing, even legitimate ones made for products supplied, be returned to the bankruptcy estate. Court can overrule and allow individual ones, but it is not usually quick. The path of this argument then says that the remaining 2 auto makers would not be able to get a steady flow of all the parts that they need to make cars/trucks, thus hastening their demise.
neoyorquina on December 3, 2008 ·
Headline in today’s NYTimes regarding bailout of car makers: “Even in Michigan, Not Everyone Wants a Lifeline”
Lasse Enersen on December 5, 2008 ·
If these companies go bankrupt, it doesn’t make the factories vanish and workers lose their jobs. Someone will take them all over, believe me. This isn’t about bailing out the “industry”, it is bailing out the executives and the board.
Elliott on December 5, 2008 ·
Lasse: You don’t close down on Friday and have a new owner take over a bankrupt company on Monday.There will be major job losses and dislocations. Why buy inefficient old factories with unions and huge legacy costs associated with them when you can build new efficient factories with major state government incentives with no unions? Also, an old factory is set up to produce a vehicle that is selling very poorly and it takes a couple of years to modify it to make your own company’s autos/trucks. Daimler bought Chrysler in better times & still finally sold it off. Who would buy it now? On other hand, I agree that executives and boards should not be rewarded or kept on to manage the remnants of their bad decisions of the past.
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neoyorquina on December 3, 2008 ·
The situation reminds me of the salary negotiation several years back with the cast of “Friends.” The actors knew that if they stuck together, they would have a much stronger bargaining position as a group than as individual actors. The production company could’ve easily found other actors to play their individual roles or just have written out individual characters. But with all of them sticking to their guns and demanding a raise as a group, they got what they wanted.
Regarding the Big Three, what has gotten lost in the discussion of a bailout are their huge pension and employee healthcare obligations. The Big 3’s current primary business isn’t manufacturing cars but taking care of its retirees. Until that situation, which is currently totally out of whack, gets permanently fixed, any bailout the Big 3 receive is just a temporary Band-Aid. If they are successful getting a government handout they’ll be back, hat in hand, begging for more cash by 2010 or 2011.
What I don’t understand is this whole business mantra of “too big to fail.” That’s probably what Goliath thought before he got taken down by a boy using a slingshot. It’s time for the Big 3 to take some hard medicine and let the dice fall where they may.