Thursday, May 28, 2009

GM and Chrysler

Remember 6 months ago when we were all told that it would be devastating if any of the Big 3 declared bankruptcy? Chrysler recently did exactly that, and GM is about to do so as well. Deep down, I think most of us knew that was going to happen anyway. There were a lot of folks who opposed the bank bailout but still supported government aid to automakers, as if it were really possible for all of the Big 3 to make a full recovery.

Many people have an emotional attachment to the Big 3. They wouldn't feel as bad if Proctor & Gamble filed Chapter 11. If Microsoft or WalMart were going under, there would be a lot of gloating. But for people whose knowledge of American history only goes back to 1941, Ford, GM, and Chrysler have been around forever.

It's like having a beloved relative who is brain dead and on life support. Intellectually, you know there is no hope but you can't bring yourself to pull the plug. At the same time, his hospital bills are costing the family a lot of money.

While it is hard to say goodbye to a loved one, we have to be more dispassionate when it comes to corporations. A company that is failing should not put on life support. The purpose of a company is to generate profit, so any company that is no longer able to carry out this function should cease to exist. You wouldn't keep a car that couldn't run, would you? Instead, you'd sell it to a buyer that would make better use of it.

1 comment:

Daddy said...

I wish it was that simple. If it was so, TV and computer boards would still be produced in this Country. They are not, as TV expertise in here is gone while out there blossoms. Plus creating a business of scale to compete with those over there who are ready to damp prices, are understood to me high. One would not be able to get credit for such endeavors. Steel people understood it here and created tarrifs for industry to cope with temp difficulty. Car industry should have been overhauled decades ago, so that it is not shitty fiat buying a reasonable Chryster but the other way around. Fiat got support of their government during hard times, while Chrysler got too late while already all rotten at the top. Not all games are fair. In some games one has to measure weights or gender in order to compete.