There Are Too Many Car Companies Anyway, writes Michael E. Marks:
The result of having too many [automobile manufacturers] is exactly what we are now seeing. Not enough companies can earn their cost of capital.And the grounds for this assertion that there are too many car manufacturers?
But with government support, they can hang on, often for a very long time, which reduces profits throughout the industry, which leads to less investment, lower quality and less innovation. So if our government is going to aid and abet this poor outcome, perhaps it should think about supporting only one of these companies, or two at the most. We just don't need three. Period. What we need is less choice.
I've picked two other categories, cellphones and computers. Both are products bought by substantial numbers of consumers, and both are products sold globally by major international companies. First some overall numbers:And the article continues.
Product Units Sold Globally Units Sold in the U.S. Cellphones 1.2 billion 146 million Personal Computers 271 million 64 million Automobiles 91 million 16 million
These are all 2007 numbers. They'll likely be lower for 2008 and 2009
Now let's look at the number of global brands of each, available in the U.S.:
Major Cellphone Brands (8)
Major Personal Computer Brands (7)
Lenovo (previously IBM)
Car Brands Available in the U.S. (40)
In sum: It is helpful for companies to fail. Industry consolidation is a good thing.
And my view?
I think he's right!