If, as the Washington Post reports, General Motors is facing “market realities” and laying-off thousands of employees then first off where did the quotes around market realities come from and second what is the opposite of market realities?
Market fantasies?
First, let’s assume that the quotes around “market realities” mean that the Washington Post is quoting other sources, most likely GM. Second, let’s skip the market fantasies digression although it seems appealing in a quasi sportsman-like capitalist way to think about fantasy markets being something like fantasy sports leagues where arm chair investors get to make their own rules and amass their own talent and reap the corresponding benefits. But there are thousands of people losing thousands of real jobs so let’s leave GM’s market fantasies out of this post.
Thousands of people will lose their jobs because of a failed business plan.
So without an overly pedantic background section for the uninitiated, assume a business plan is a reason for people to lend you money so you can make money with your business. College kids can do it. Some might say it should fit on a napkin. But it should probably make sense. Now one can only assume the specifics but noting in the announcement of lay-offs that “very few people are jumping boulders in Sedona. They are typically facing nothing more than traveling on snow down a gravel road in a rural area” (if that) then one really should question GM’s business plan.
Were they really thinking their gross profits would increase with higher gas prices?
The above figure shows a growth in gross profit and global market share as function of a rising price of gas. Once again, without being overly pedantic, let’s assume a tornado diagram is a way to plot what happens if various assumptions about your business plan are off. Is it possible that the GM business plan for this segment of automobile buyers really had gross profit only increasing with rising gas prices?
Seems kind of hard to believe. The alternative is that GM assumed that gas prices would drop. But how low? When? Where? And days later they are announcing new partnerships in cellulosic ethanol. Ah, ethanol for $1 or $1.50 per gallon – that sounds more like it.
Bold Lentil 