The recent troubles of American car makers show this clearly. Gristmill:
...for years they refused to listen to those who begged them to build fuel-efficient cars -- heck they ran away from the hybrid vehicle partnership they started with the Clinton administration in the mid-1990s once W. took office, ultimately giving Toyota and Honda a 10-year lead in the core drivetrain technology of the century.
Competition has hurt GM. Their workers' legacy health care and benefits package is unsustainably more expensive than that of the foreign auto makers. Their cars are not as energy efficient. The damage is largely self-inflicted by their refusal to adapt their business and innovate to create a more competitive product that customers increasingly demand in the market. The Energy Crisis of the 1970's should have been a wake-up call. We muddled through and went back to the old ways. The growth of foreign brand market share should have been a wake-up call. Instead, there was lobbying to protect an uncompetitive product line and a failing business model. The folly here would seem to be a belief that change can be successfully resisted, that the tide can be commanded to stop, that you can step into the same river forever. Did Detroit's executives naively believe that our oil economy was limitless and that the Republicans would protect their flank forever? That party's over.
General Motors (GM) now publicly worries that they will run out of cash as soon as the first quarter of 2009. Some analysts think it will be as soon as next month, and the stock will become worthless. This is a probable outcome if GM is forced into a death embrace with Treasury Secretary Hank Paulson, who will smother the remaining pittance of shareholder value with his TARP. Today, Toyota's market capitalization is 70 times that of GM. Purchasing GM at the current stock price would cost less than $2B.
It didn't have to be like this.
...Detroit has not only been suicidally lobbying against its own inescapable future of highly fuel-efficient cars; it has been lobbying against the future of all Americans who want to end our oil addiction, and against the future of all humans who want to preserve the health and well-being of our planet for future generations.
Fred Wilson writes that GM's brands would be better off as independent businesses, and that the country would be better off without companies that are "too big to fail". Furthermore:
...we need to completely neuter the auto industry's ability to lobby our govt to stop important initiatives like clean/alt+energy and mass transit. Its borderline criminal what the auto industry's political efforts have done to our global competitive position right now.
The same is true of the financial services business, the airline business, electric utilities, and a host of other industries.
More than 50 years ago GM's president, Charles Wilson, said "what was good for the country was good for General Motors and vice versa." When did both GM and the country lose faith in this idea?