Buisness Management Questions

[Shadow Storm]

In relation to the current economic crisis and the failing car companies, a question occured to me concerning the buisnesses. It may seem simple to some, but I don't really have any training in the buisness field, so here it goes.

If Company A and Company B both competed for selling the same products to the consumers, and Company B did a better job at it then Company A, then Company A would inevitably fail and go bankrupt, and Company B would takeover, would it not?

Going a step further, if consumers like Company B's product, why would they switch to Company A's product instead of continuing to buy Company B's product? Would they feel remorse and pity for Company A and decide it's worth having the more expensive or crappy quality in exchange for having Company A still hanging around?

Which brings me to my main question(s). Although they have done well in the past, which led them to being the top dogs in the industry, if some of the car companies started failing and going bankrupt because the consumers preferred other companies cars, does the goverment think that erasing their losses by throwing in money will suddenly make them seem more attractive to the consumers? Or would it achieve the opposite effect, scaring away consumers afraid that the car companies would come under goverment management?

Wouldn't the money have been better spent offering stimulus to the successful car companies, under the condition that it be used to expand their operations and capabilities to provide jobs for those who would lose them in the failing car companies?

O_o

[Lilaena De'Ville]

The government throwing money at businesses that were failing was a poor decision, imo. They were failing for a reason and there are bankruptcy options for businesses for a reason. Now the gov. owns controlling interests in failed businesses! Yay!

[Redik]

In relation to the current economic crisis and the failing car companies, a question occured to me concerning the buisnesses. It may seem simple to some, but I don't really have any training in the buisness field, so here it goes.

If Company A and Company B both competed for selling the same products to the consumers, and Company B did a better job at it then Company A, then Company A would inevitably fail and go bankrupt, and Company B would takeover, would it not?

Going a step further, if consumers like Company B's product, why would they switch to Company A's product instead of continuing to buy Company B's product? Would they feel remorse and pity for Company A and decide it's worth having the more expensive or crappy quality in exchange for having Company A still hanging around?

Which brings me to my main question(s). Although they have done well in the past, which led them to being the top dogs in the industry, if some of the car companies started failing and going bankrupt because the consumers preferred other companies cars, does the goverment think that erasing their losses by throwing in money will suddenly make them seem more attractive to the consumers? Or would it achieve the opposite effect, scaring away consumers afraid that the car companies would come under goverment management?

Wouldn't the money have been better spent offering stimulus to the successful car companies, under the condition that it be used to expand their operations and capabilities to provide jobs for those who would lose them in the failing car companies?

O_o

You are missing two parts to the equation.

Part I: Location.

American automakers are just that: American. While taking money out of bad carmakers and putting it into successful ones is optimally how the market is supposed to work, there are not a ton of successful automakers available in the US. Also, with the larger automakers there is no guarantee that a simple shuffling of money is going to replace the sheer amount of jobs that would be lost from such a huge business going under in a particular region of the US. Since part of the goal of government stimulus is to keep the American economy going, shuffling money towards foreign automakers does not make as much sense.

(Please note: where a company's profit actually goes is dependent on where its shareholders are from. However, something like a manufacturing plant has to have employees in close proximity. Those employees supported by US manufacturing* are the ones the government is trying to target)

*editor's note: HAHAHAHAHA, US manufacturing is almost an oxymoron but anyway

Part II: Time

Part of what the capitalist market is not so great at is absorbing a correction after an extreme condition. It is also far better at growing than shrinking. The market will ultimately return to some working fashion in the near future, but stimulus going towards failing businesses of any kind blunts the loss of jobs at any given point (the business can keep going because it has the money to pay its expenses). For especially big companies, the extreme job loss that would be caused by their failure is something the market would be hard-pressed to accommodate in already poor conditions. AIG, for example, was "too big to fail" because if it HAD failed, the predicted job loss over the world in general and the US in particular would have been extremely painful and possibly catastrophic.

So when you read about the government propping up this or that failing business by effectively buying ownership (which it is not doing for every business, mind) the real effect of that action is to buy time for the market situation to improve while retaining some potential for a return on its investment.

PS: Figrin is far better an explainer on this particular topic because his knowledge is broader than mine. If he posts, you will probably be much more enlightened (as will I) than the bits I have posted here. :)

[Darth Turbogeek]

The government throwing money at businesses that were failing was a poor decision, imo. They were failing for a reason and there are bankruptcy options for businesses for a reason. Now the gov. owns controlling interests in failed businesses! Yay!

Your opinion is wrong.

Unless you wanted to have the USA go into one hell of a depression that would make the last one a cakewalk - do you have any idea what the unscripted backrupcy of Chrysler and GM would have done? Not surprisingly, I dont think you do because you just dont grok it. This very discussion has been stated before and I will again state what is the reasoning. It was not to buy out bad business as the Fox News talking point bullshit claims it was.

The government money was to stop the wholesale collapse of both companies, creating a massive flowon effect that would have destroyed thousands of other profitable businesses that supply goods and services to employees and to the companies. This would pretty much knock out a huge chunk of manufacturing capacity and ability to make shit - something all healthy ecnomies require. The consequences would have been millions unemployed in a single swipe, multi billions lost by the banks in loans from formally good businesses now without a market, billions in unemployment benefits, states like Michigan going bankrupt and failing. This is not some bullshit OMG scare... this is reality. The whole point of Goverment Motors was to cut off the sections that are unprofitable that could not be done without bankrupcy protection, restructure and realign profitable lines, remove dead dealerships and waste without financial penalties, plus give time for other buisneses that rely of the motor sector to realign, choose to fold up nicely or seek other business.

Bankrupcy also allows inventories to dwindle, an important factor in clearing the decks.

Chrysler was allowed thence to become part of FIAT and continue operation, with the funds the Govt put up to be paid back - interestingly, a lot of banks that got bailed out are paying the loans backs. Chrysler will do the same.

GM is somewhat more difficult, but in it's core it is still a viable buisness that was weighed down with insane legacy costs. Bankrupcy allowed the legacy costs to be culled, internation GM centres to be sold for a nice profit wihtout the normal burdens, restructuring of product lines, a big fuck you to the UAW and to dealers who refused to see reality, unions get a take it or leave it deal, dealers who had been hanging legal action to prevent unprofitable dealerships from closing get a too bad.

Government Motors now also keeps the heavy manufacturing capabilities that is desperatly required alive. If you are looking to build big shit, a car manufacturer actually is pretty good at it, with a lot of expertise and equipment. In WWII, car production lines were turned over to produce all sorts of wartime crap, similar principle applies.

Governement ownership also allows the business to access a deep credit line and resources that usually, private business only dreams of. It is in fact not unusual for private corporations to obtain govt financial assistance in projects that require resources the private concern can not hope to get. GM until it is sold off has access to this, thence they can quickly modernise plant and equipment. There is also one other interesting result - state laws that can hamsting a business no longer apply in part as the Feds can override that easily or different laws come into play.

As a fairly minor investment (for a governement), saving GM turns out to be actually quite a wise one, even if frankly the Govt had little choice if it didnt want a depression on it's hands. Instead, it has a pretty decent asset now the crap has been cleared out and one it could use to further it's own goals in regards to economic restructuring. It also has a far lesser economic problem. So do thousands of other business and millions of employees. That is in reality how big an economic slice car manufacturing is. It also helps a lot with balance of payments and trade - less imports, probable exports. Cars and trucks are valuable and big things that lead to lots less money exported.

[Figrin D'an]

The US auto industry is a pretty complex animal, and will continue to be so even in it's restructured form (I'm generally referring to GM, Ford and Chrysler here). An unchecked failure of the US auto makers would have been completely catastrophic for the world economy, not because of the damage to the primary auto manufacturers, but because of the domino effect of collapse that it would have caused in the various tiers of support levels within the industry. Many people don't realize that there are many, many smaller companies who help to form the supply chain that creates the components that eventually end up in a GM assembly plant (for example) and become the car that ends up on the showroom floor. That chain, which also supplies a good number of transplant automakers as well (people tend to forget that companies like Toyota, Hyundai, Honda, etc. have massive manufacturing assets in the US that are anywhere from partially to fully supplied by the same chain of businesses that supply the "Big 3"), literally accounts for millions of jobs in the US alone.

I work for a company that is considered a Tier 2 supplier. We are diversified into many other areas, but a large percentage of our volume goes to Tier 1 suppliers who work directly with the major automakers. Our branch of the chain is fairly simple, but in some cases, the chain of suppliers goes as many as six Tiers deep. It's a massive undertaking to comprehend at times.

So, I know there are a good number of people who will say the injections of money into GM and Chrysler were wasted because "they went into bankruptcy anyway." I think what not often understood here is that those funds helped to prevent a complete collapse of both companies and allowed for a reasonable restructuring process to take place, which in turn saved from failure a huge number of smaller companies from being taken down as well. The company which I work for is profitable. We generally always have been, as are a great many of the smaller businesses that make up the supply chain. But even a profitable company will fail if it's volume demand vanishes overnight. The difference between an instant cut off of demand and a gradual transition cannot be underestimated... it gives businesses time to strategically plan for inevitable change.

[Loklorien s'Ilancy]

Yeah, we've got an M class Mercedes plant not twenty minutes up the road, and a lot of their smaller satellite companies like Johnson Control got hit hard. A year or so ago Mercedes was offering employees upwards of 10k (I believe) to quit.

[Lilaena De'Ville]

I am so glad Mark is around to point out how ignorant everyone else is. And he does it nicely, too. What would we do without him.

I know why the car companies were bailed out and why they 'had' to be. But in general I think the government should not bail out failing companies! You cannot say that is 'false' because it is my opinion. Philosophy 101.

[Redik]

Figrin: Thanks for posting that. I knew you had a really good perspective on it, and while not much of it was really "new" to me, it was definitely really well explained.

Like myself, Mark, and Figrin pointed out the real thing the US bought itself with these "bailouts" was not the continuation of failing businesses for no reason. It bought time: time for the market to improve, time for the businesses to sort out their affairs, time for the people employed by those businesses to find alternative jobs or transition to new ones at their current employer. It also bought the ability for those businesses to free themselves from certain things about their situation that they could not control - things that caused them to be unprofitable - as Mark pointed out.

Not going to address Holly's opinions except to say that I really can't see where she's coming from and there's not much specifics she's presented that I can support or disagree with.

[Morgan Evanar]

I am so glad Mark is around to point out how ignorant everyone else is. And he does it nicely, too. What would we do without him.

I know why the car companies were bailed out and why they 'had' to be. But in general I think the government should not bail out failing companies! You cannot say that is 'false' because it is my opinion. Philosophy 101.You know, if you weren't so terribly wrong this wouldn't be a problem.

I'll mark you down for being for total economic collapse, because that's what would have happened.

[Darth Turbogeek]

I am so glad Mark is around to point out how ignorant everyone else is. And he does it nicely, too. What would we do without him.

I know why the car companies were bailed out and why they 'had' to be. But in general I think the government should not bail out failing companies! You cannot say that is 'false' because it is my opinion. Philosophy 101.


Present a resonable and rational argument instead of gross and false generalisations or talking points and I'll surprise you with being rational and polite instead of hellacious venomous prick.

You have posted a long list of ridculous complete garbage in political and economic discussions for years and frankly it's about time you fucking stopped as you have no clue and no williness to even get a clue. I am not going to be polite to anyone - admin or not - who flat out posts lies and garbage. You and your fellow Republicans disgust me in the sheer stupidity and inability to think beyond talking points - you and the likes like that are the real problem in all of this, you voted in a bunch of fucktards that have ruined more than just yur own turf.

I am not going to hide behind being mates with Chris so frankly I am going to make this one damn well worth it. You are a bloody awful admin and should have been forced out long ago. You should have been called a dumb bitch to your face. You have promoted lies and bullshit that have been easily slapped aside - I only have to refer to your riduclous and wrong support for wars in the middle east and the Swiftboat crap you dribbled out. Frankly, your country is in deep trouble and the Republicans should be nuked from orbit for what they did - but no. It's insane anyone should contiue to give any kind of creedence to such failure.

It is entirely right either Chris presses the ban button for a mod sass like this, even if every word is true. Do it. Enforce the rules. But frankly, finally go fuck yourself Holly, I have had enough of your stupidity and I want to see or hear no further part of it- This meltdown is directly soley at you. Everyone else I wish well. I have enjoyed most of my time here and will stay in contact.

[CMJ]

So I take it the Christmas cards aren't going in the mail?

[Shadow Storm]

This thread is a perfect example of everything I love and hate about both Democrats and Republicans. At the end of the day, one of them will keep the economy running, while the other will keep our morals intact. :\

[Jedi Master Carr]

This is why I don't get involved in these thread that often.

[The Original BuffJedi]

I'm with Master Carr... But i will say ..I love Fox news!! So glad Turbo lives far away :D

[Ryan Pode]

Cars go vrooom!

[Liam Jinn]

Thank you Ghostbusters.

[Morgan Evanar]

I'm with Master Carr... But i will say ..I love Fox news!! So glad Turbo lives far away :DBeing lied to all the time is awesome!

[Shadow Storm]

This is why I don't get involved in these thread that often.


*Scratches head*

That's kind of what I don't understand here. I asked a question, both sides answered it, then it degenerates into a quick rage flame fest that ends up hurting some people and causing others to leave. o_O

[Dasquian Belargic]

Thread closed for the timebeing.

Thread will reopen in a could of days, giving those involved a chance to cool off and consider their next posts carefully.

Everyone here has different political, religious, etc beliefs and whilst I enjoy a good debate as the next person, the board is not the place to air personal grievances with eachother. You can call eachother til your blue in the face away from the forums but don't turn a previously civil discussion here into a fight.

If you have a problem with this, I suggest you take some time out from posting. If you are not capable of this, I will give you some timeout myself, though I'd much rather this conversation continued without having to resort to that.

[Dasquian Belargic]

Thread open once again.