There are a number of
reasons why businesses fail. Businesses like automobile manufacturing have the
advantage of making a commodity that is likely to be needed for a long time,
maybe forever. But what companies do with
this opportunity determines who will survive and who will fail.
The Industrial
Revolution required capital, ingenuity and tenacity on the part of
Industrialists. They had to borrow money from banks and move quickly to get a
cash-flow from paying customers.
The early history of
automotive manufacturing is well known and it occurred at a time of great
upheaval.
Electricity was
invented in 1882 but didn’t became available in the US until the 1920s along
with chlorinated water. John Rockefeller produced oil for lamps and had to move
quickly to develop gasoline for automobiles to survive through the transition
from gas lights to gasoline engines.
Steam Engine Cars were
produced in the 1890s. The internal combustion engine had been invented in
1876. Cars were in use by the rich in the 1880s and 1890s, but were too
expensive until Henry Ford invented the assembly line and brought the price
down from $1000 to $500. Ford built the
Model T from 1908 to 1927. Many were trucks families bought to transport their
goods.
Ford, GM and Chrysler
emerged as the “big three” auto makers in the 1950s. As gasoline prices
increased, foreign car companies offered smaller cars with better mileage.
Labor Unions, poor
quality, higher gasoline prices and bad management were to blame for the
decline of US auto manufacturers in the 1970s. By the 1980s, Japanese and
German cars began to replace American cars in the US.
Chrysler was sold to
Fiat in Italy. Ford wasted money on
driverless car and electric car technology. GM hangs on in the global market,
but has never been an innovator.
In the private sector,
executives are replaced when the Board or CEO believes that the executive will
not be able to deliver needed results. It is rare for an executive to live
through a large and obvious failure.
GE stock under Jack
Welch rose from 1980 to 1999 to $58 per share. Jack retired and Jeff Immelt
became CEO in 2000. During Jeff Immelt’s time as CEO from 2000 to 2017 GE stock
fell and reached $17 per share by 2017.
GE recognized its failure in 2017 and replaced CEO Jeff Immelt and half
of its Board of Directors. Under Immelt,
GE stock peaked at $33 in 2000 and dropped to $17 by 2017 and new sits at $12
in 2018.
In business, when
sales slump, new products fail or don’t launch, costs are out of control and
financial results are poor, executives and managers take action to correct
these failures.
The rules are simple.
Don’t run out of cash. Don’t run out of
customers. Fill a current consumer demand. Don’t take any dumb risks.
Norb Leahy, Dunwoody
GA Tea Party Leader
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