Friday, November 27, 2009


Remembering British Leyland
  • George Will argues that Christmas doesn't serve much use as an economic stimulus. I have to admit it reeks of Keynesian thought.
  • Cash for Clunkers was apparently such a hit with the Obama Administration that it now wants to do a household edition.


Paradigm Shifter said...

Combine that with some of the numbers from a similar story in the NY Times a year ago, and you start to get the complete, awful picture of British Leyland.

I wrote two pieces over the last year using that story as a backdrop.

What's funny is that I have now worked for two companies that have owned remnants of the Leyland brand. First it was Ford, who owned Jag and Land Rover. Now it is PACCAR, who owns Leyland trucks out of their true bankruptcy ( The outcomes couldn't be more different. Ford threw so much money at Jag and Land Rover until they had enough and sold them at a fraction of their cost. PACCAR bought Leyland Truck and immediately focused on business plans that made a profit. Ford has seen highly cyclical business cycles. PACCAR is ready to report its 71st straight year of profit.

And that's the lesson here. The danger in bailouts isn't just an immediate one. It's also a prolonged one, in that hiding the true state of the company behind artificial cash infusions delays critical restructuring and sucks good capital in from other companies that could be spent elsewhere as they incorrectly believe the company is a better buy than it really is. Bankruptcy properly prices the company's assets, and allows the new management team the leverage to make the necessary, painful changes required for future profit.

Ford CEO Alan Mullaly's results via the "One Ford" focus he has instilled in the company, and it's direct opposite of a shotgun brand approach that included Jag and Land Rover in previous decades, should convince all of us of the pitfalls of bailouts and misallocated capital.

Colin said...

Interesting comments, thanks.