Science Forums 2

[CraigD]

We’re wandering out of engineering into the realm of business economics and economic policy, and should IMHO eventually move some of these posts to another forum, but it’s an interesting discussion.

Originally Posted by GAHD

I was referring to having these various parts of the bigger GM conglomerate 'sold off' as whole to other smaller manufacturers to prevent the "too many eggs in one basket" problem that is currently threatening to continue an economic collapse.
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I think we're on the same page, but looking at different angles. Yours appears to me to be that the large company needs to remain as is and as a whole, while I think that having it go under and be portioned-out to existing companies like phoenix/zenn to be converted into a different type of personal conveyance manufacturing plant. It is my understanding that there are different plats set up for different vehicles, though I may be wrong. Having them transfer to a wider audience of owners promotes competition, and stops the eggs being in one basket (and oh no the basket went rotten!) problem.

The basic idea I think GAHD is proposing is monopoly breaking, a complicated and controversial one many times older that the car industry.

The core of the idea of what constitutes an unfair monopoly that should be broken, is, I think, that large companies use the influence arising from their size to prevent small companies from competing with them. The “big 3” US car companies, then – Chrysler, Ford, and GM – can be seen as the only surviving companies by virtue of being similar enough in size that they were unable to ruin one another in this way.

Following the same logic, small companies like Phoenix, ZENN, and Tesla survive only because they occupy niche markets the big companies see as too small to warrant their competing in, and overlapping their main markets too slightly to much affect their revenues. Where the market of these companies to grow, the big companies would likely buy them from their original private owners or shareholders. In the business world of the last few centuries, in fact, being acquired by a large company is considered a sign of great success, and how many owners of small companies become rich. Without strong contradicting statements, we can reasonably assume that the owners of Pheoneix, ZENN, and Tesla would be delighted to have their companies acquired by Chrysler, Ford, or GM.

The only effective way, then, for there to truly be many small, independent companies competing in the main markets, is for governments to force this to occur by breaking up large companies, and forbidding more successful ones to use their relatively greater size to ruin less successful ones, or recombine via acquisitions. The main problem if government does this, is how to avoid unfairly protecting smaller, less successful companies that are less successful because their cars are simply less good, resulting in many end consumers being stuck with inferior products.

The ideal scenario is one in which a small company with a superior product is able, with only minimum support from the government in the form of assuring that their large competitors don’t ruin them with outright criminal acts (eg: threatening to or actually murdering their employees or vandalizing their property), win a growing share of the market. However, there are more barriers to this than just competition.

One of the greatest barriers involves how cars are actually sold to consumers. In the largest part, this is done through “brick and mortar” car dealerships that have contracts with one or a few manufacturers in which they agree only to sell only those manufacturer’s cars. Although niche market companies like Phoenix and Tesla are able to sell small numbers of cars via the internet and word of mouth, this can accommodate only a small number of customers.

To sell numbers of cars approaching those of the current big companies, new, small companies likely will need dealers. Creating a large number of contracted dealers, however, is difficult, so some alternative seems needed.

One possibility that come to mind are large, multi-store, nation or world-wide independent dealerships. Currently, in the US, only two to my knowledge, AutoNation and CarMax, matches this description, and only on a small scale, less than 2% of total new car sales (both are primarily used car stores).

Were business modeled after AutoNation and CarMax able to gain the majority of new car sales market from name-brand dealerships, the dealership bottleneck for small manufacturers could be reduced.