Fred Wilson, my current favourite VC chats about how he’d like to see the auto companies broken up. I have some sympathy for this view but I take issue with his, and many other people’s statement that ‘We can’t afford to let the entire auto industry supply chain go bankrupt”.
The US 3 (no longer the Big 3 since GM is no worth less than Apple turns over in iPods) employ some 150-200k people directly. Their supply chain partners employ another 100-150K people and then there are the dealers. Auto is the largest retail employer in the country. Sounds like a disaster if this 1m+ collection of people went bankrupt right?
Well no – first off, does anyone really think this would be a vanishing act? When a bank goes, it’s fundamental structure does not exist any more – GM, Ford and Chrysler would still own plants, plans, facilities, land – they’ll re-appear in some guise, just smaller. Yes we’ll see 100k+ job losses but in reality these guys are making stuff no-one wants and there’s no indication that this will change.
We saved the banks because they really are all tied in to each other and if they vanish, society as we know it is screwed. It’s also possible the rest of the world would have gone down in flames with the USA. If the auto makers vanished, there would be an unemployment issue, sure – but Toyota and Nissan and a whole set of actual well run car companies would take over those dealers, buy the plants and in 2 years all the cars would be just fine – expect that they’d be cheap, good and actually sell.
The auto industry is saying “Hey, we’re really important” though they’re not. They also saying “We screwed up every single decision possible even while publicly stating we knew the right way to go, but this time it will be different” – I find this difficult to believe.