celticwar17 wrote:
"There is always a demand for car's so it would definitely bounce back in no time."
Let me explain a bit about why they don't bounce back in no time.
In Grand Rapids MI there are many auto industry suppliers.
There are also many vacant industrial buildings many have been vacant for years.
Many previously occupied by auto industry suppliers.
When auto industry suppliers and manufactures are up and running the cost of moving is high.The ROI for a few quarters would be hit. If it stops running then ROI is already toast, so consider moving.
1st,
With the start of the recovery you would think that these building would return to use. That is not what happens. Rather new building need to be built, not that the vacant buildings are not up to date etc., but the vacant buildings are tied up in legal limbo and have book values that are high. So a new start up auto supplier or other business is better off going to a 'build to suit'.
So, with the bankruptsy of an existing supplier a new auto supplier can't take over the old building in any reasonable amount of time.
2nd,
Tooling: Often the tooling a vendor uses is owned by the customer. At bankruptsy it is stuck in the wrong location and can't be dispositioned until the legal issues are cleared up. It may be quicker and more cost effective to build new tooling especially if you are going to use it in a new location. There are many complicating issues like this.
3rd,
The few workers with valuable expertize move out of state.
4th,
It is very much quicker and less costly to expand a running supplier than to restart a bankrupt one. And now most of those are off shore.
5th,
If you are going to start a new one you will consider all possible locations. Things like labor costs, labor skill sets, worker rights, taxes, bribes, legal system, etc.
6th,
Grand Rapids, or the US, is not the place I'd choose if I had to re-establish capasity quickly I were the CEO
of Toyota, Honda etc.
The way the auto business is split up into may pieces, most supported by cash flow,
when you stop a significant piece of it you can break the whole thing.
I think it was necessary for them to fail! It would force people to revamp the system to where it would work more efficiently. There is always a demand for car's so it would definitely bounce back in no time. This is what Capitalism is. Just bailing them makes it so they don't get punished for bad financial decisions. This applies in EVERY case except if a monopoly is thrown into the mix; which i think should be against the law and regulated, which it is.