Point to ponder: Ever wonder why the Union (UAW) would not give any more concessions, even risking a closure of one of the auto companies in the process that will surely hurt many of their members?

Answer (as told to me by someone in the know): If they give concessions that affect their entire membership (like wage reductions or benefits reduction), the entire membership is going to be unhappy with the Union leadership and their clout weakens. They would rather have a portion of the membership take all the pain (let's say if Chrysler or GM goes bankrupt) if there is a chance that the remaining members will stay happy and support the leadership and keep the union going in the future.

The US automotive industry has been dysfunctional for some time and it needs to be simplified and fixed. It is not a question of technology or skills that are hamstringing the big-3. It is just the business model that does not work anymore. If one or more of the big-3 die out, it does not mean that the US automotive industry has reached its end. Most new automotive jobs in US are created by foreign automakers anyway. The void will allow the remaining automakers to become more profitable as supply is brought down, and it will also allow new more nimble and forward thinking auto company to emerge (for example, Tesla). We have seen instances of a mining company like 3M completely transform itself with time, a furniture maker (Nokia) turn into the world's largest cell phone manufacturer, Corning (glass maker) change its business many many times to keep up with the changing times. It is lamentable that the auto-makers were not able to change with the times given the fact that many of the problems plaguing them (quality, design, etc) have been decades in the making. I for one am glad that the Obama administration has chosen to draw a line now.

Post from: Arohan's investing life