The machinations over the “rescue” of the US car industry have been spookily familiar for those old enough to remember British Leyland in the 1970’s.
The idea at one point that GM and Chrysler would be merged sounded like the forced merger of Austin/Morris/Rover (BMH) and Triumph/Jaguar (LMC) that created BL in the first place. Now huge sums of money are being offered by the US government to help the companies re-structure similar in some ways to the UK government’s nationalisation of BL in 1975. Indeed it does look like the US taxpayer will own significant ot even majority shareholdings in both companies if the re-structure goes ahead.
What prompted this post is the fact that the UAW, the main union involved, has been asked to take a significant shareholding as well, to recognise healthcare and pension liabilities.
This piece in the FT also points out the key dilemma for the union and its members. Good investment principles for pension funds are to diversify risk, so the shareholding should be sold down as soon as sensible, however the shareholding provides a significant incentive for the staff to do what they can to ensure the successful recovery of the business and continued employment of their members
So will they chose to operate like a worker’s co-operative? Will they learn the lessons of the Meriden Motorcycle Co-operative, again from the 1970’s?
Or will the whole deal fall apart and the two companies go into Chapter 11?
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It seems like Google is about to fall foul of the regulators / politicians which to me highlights another aspect of the “too big to fail” idea described below i.e. at what point is a growing company perceived to wield too much power? This is a particular problem in technology markets where new companies can go from start-up to domination in a relatively short period of time; Google 10 years, Microsoft 15 years and IBM 20 years.
It seems like dominant market players are going have an increasingly hard time of things over the next few years. Part of this may be cultural for the companies involved in that the period of entreprenurial excitement will end up being a lot shorter and large company bureaucracy relating to external regulation arrive earlier.