When General Motors and Chrysler were facing bankruptcy our government stepped in, handed both companies a ton of our money to reward them for failing, and then allowed them to pay back these “loans” with money obtained through a different tax payer funded scheme.
There is another way companies can void bankruptcy and it doesn’t involve stealing money from the tax payers. This method, although hardly known, is to produce a better product. A recent story I came across talks about Rovio, the makers Angry Birds. It seems before publishing their title that everybody and their grandmother has probably played they were facing bankruptcy:
First they had to save a company in crisis: at the beginning of 2009, Rovio was close to bankruptcy. Then they had to create the perfect game, do every other little thing exactly right, and keep on doing it.
Now the company has something like $50 million on hand. What an amazing concept, a failing business bringing itself back from the brink by offering a product or service that people want. It’s such a novel concept.
GM might have been fine with that. The did improve their product line. The Cobalt and Malibu were vastly improved over the cars they replaced. The Corvette was on parity with Ferrari.
Except…
Those guys what make them? Yeah. Even if (customer) demand is 10,000 cars, you have to pay them for the full 75,000 car capacity of the plant regardless of how many you make.
Those guys what sell them? Yeah. You have to send each of them a certain number of cars each. That’s much more than the 10k that will sell and a lot less than the union is contracted to build.
Those two things alone are enough and they aren’t near everything that was wrong.