White House tells GM boss to step down

[DGuller]

Industries that have very high fixed costs, sell commodities, and must determine capacity years in advance are tough places to make money. The nature of business is optimism, and the result is excess supply without significant variable costs to reduce.

Agreed.  Commodity producers with high fixed costs are really challenging the free market assumption.  I'm fairly convinced that for those markets, competition can actually become destructive rather than constructive, like we are taught to assume in Econ 101.  It's not like it's easy to lay low during the good times either, because then you'll have the same fixed costs, and all your clients with reckless competitors.

[alfred russel]

Industries that have very high fixed costs, sell commodities, and must determine capacity years in advance are tough places to make money. The nature of business is optimism, and the result is excess supply without significant variable costs to reduce.

Agreed.  Commodity producers with high fixed costs are really challenging the free market assumption.  I'm fairly convinced that for those markets, competition can actually be destructive rather than constructive, like we are taught to assume in Econ 101.  It's not like it's easy to lay low during the good times either, because then you'll have the same fixed costs, and all your clients with reckless competitors.

Econ 101 would say that investors would recognize this and make capital more scarce for these industries, imposing a prevention of overcapacity. But for some reason, people keep investing in airlines...

[Valmy]

Econ 101 would say that investors would recognize this and make capital more scarce for these industries, imposing a prevention of overcapacity. But for some reason, people keep investing in airlines...

Probably because the government is likely to step in and help them recover losses.

[Ed Anger]

I just bought a 1000 shares of GM @ .88. Goes down, no big loss. Company saved, potential profit.

[Barrister]

I just bought a 1000 shares of GM @ .88. Goes down, no big loss. Company saved, potential profit.

Should've spent the money on lottery tickets.

[Ed Anger]

I just bought a 1000 shares of GM @ .88. Goes down, no big loss. Company saved, potential profit.

Should've spent the money on lottery tickets.

When the jackpot hits 200 million, I will.

[DGuller]

I just bought a 1000 shares of GM @ .88. Goes down, no big loss. Company saved, potential profit.

Company saved <> common shareholders saved.

[crazy canuck]

I just bought a 1000 shares of GM @ .88. Goes down, no big loss. Company saved, potential profit.

Lol Ed, the bankruptcy is going forward on either Sunday or Monday.

[Ed Anger]

I just bought a 1000 shares of GM @ .88. Goes down, no big loss. Company saved, potential profit.

Company saved <> common shareholders saved.

It is petty cash to me, so we'll see if my crazy investor-fu pays off. 

[Admiral Yi]

Agreed.  Commodity producers with high fixed costs are really challenging the free market assumption.  I'm fairly convinced that for those markets, competition can actually become destructive rather than constructive, like we are taught to assume in Econ 101.  It's not like it's easy to lay low during the good times either, because then you'll have the same fixed costs, and all your clients with reckless competitors.

Oil companies have high fixed costs and produce a commodity, yet we don't see periodic collapses of oil companies.

And most airlines lease their planes these days I believe.

[DontSayBanana]

Oil companies have high fixed costs and produce a commodity, yet we don't see periodic collapses of oil companies.

And most airlines lease their planes these days I believe.

The fluctuation isn't quite so major for oil producers. Oil has a shelf life, so they don't have to write off unsold product immediately, unlike with sales of dated materials such as dated car models or seating tickets. Also, it's much easier to project and account for maintenance during the life cycle of leased equipment owned by oil producers than it is to project and account for the cost of leasing entire fleets of airliners- I think you'll find a closer comparison in petroleum transporters than in the oil producers.

[jimmy olsen]

I just bought a 1000 shares of GM @ .88. Goes down, no big loss. Company saved, potential profit.

Company saved <> common shareholders saved.

It is petty cash to me, so we'll see if my crazy investor-fu pays off. 

I suggest investing your next $800 in Tim.

[alfred russel]

I just bought a 1000 shares of GM @ .88. Goes down, no big loss. Company saved, potential profit.

Company saved <> common shareholders saved.

It is petty cash to me, so we'll see if my crazy investor-fu pays off. 

I suggest investing your next $800 in Tim.

Even at this point, GM is probably a better investment.

[alfred russel]

Oil companies have high fixed costs and produce a commodity, yet we don't see periodic collapses of oil companies.

And most airlines lease their planes these days I believe.

A leased plane isn't necessarily all that different from a purchased plan financed with debt.

Oil companies are a great comparison and you have a good point. My explanation would be that in the past the oil industry was notorious for boom and bust cycles, but the current limitations on supply prevent too much production.

[The Minsky Moment]

Oil companies are a great comparison and you have a good point. My explanation would be that in the past the oil industry was notorious for boom and bust cycles, but the current limitations on supply prevent too much production.

But another explanation is that the better oil companies have very good management.

There is a similar dynamic in the steel industry (which also has issues of state support) - but the better managed companies seem to survive and even increase share.