How Bankruptcy Would Wreck GM and Chrysler

It's called 'Capitalism'

A company either remains adaptable and responds quickly and properly to a shifting market or it goes under. It's pretty much that simple. Every domestic auto maker banked on large-scale manufacturing of vehicles that relied entirely on a finite resource for fuel. In some cases, some accommodations were made for this fact, but in most cases, the motto was "Bigger, faster, stronger" and fuel consumption was not a consideration.

The true irony, and why I have no sympathy for the big 3's current plight, is that they had ample warning of this impending fuel supply disaster and could have moved to completely avert it. In the 1970's they saw America's taste for personal transportation swing toward the economical. But as more safety rules were enacted to ensure the passengers and drivers of these economy cars weren't turned into a par-fried puree in an accident, they became more expensive to build. Because those same safety rules didn't apply to trucks, the domestic auto manufacturers began marketing larger vehicles to the American public in the form of minivans, SUV's and other gas guzzlers, reaping huge profits because they didn't require the same expensive safety features and the margins were better.

Anyone remember all of the roll-over studies done on these earlier models and how a blow-out at freeway speeds usually resulted in a totaled vehicle? Badly designed, top-heavy and unstable were the hallmarks of the first SUV's. And because each brough more profit per unit sold than a similarly priced passenger vehicle, they were pushed on the American public.

The big 3 opted for short term profits and failed to do any meaningful long-term planning for their products. They persisted in trying to sell an image rather than real economy and they got their fiscal wieners caught in the economic grinder of a consumer rejection of their major lines. They forgot the need to remain flexible and opt for smaller profits today in order to remain solvent later when fuel prices were destined to go up again.

This is capitalism at its finest. Those who can respond to changing market conditions the fastest and best, win. Those who can't go bankrupt.

The big 3 seem to be the bloated engines who couldn't.

Fatesrider of CA @ Aug 22, 2008 12:51:07 PM

We Had to Destroy This Industry to Save It...

Yeah, government forcing corporations to make and market products the public doesn't want to buy sounds like the road to success to me!

RNB of GA @ Aug 22, 2008 12:44:30 PM