Several times I have heard callers to radio shows talk about how the threat of bankruptcy will drive the auto industry into bankruptcy. The notion is that customers care about the firms being around when they are making their decision to buy a car and that the companies would otherwise be good investments if it wasn't for this threat driving away customers. Obviously, if it pays to make the parts, firms will supply replacement parts. But there is a simple point to also make: if the firms would really be profitable once people are convinced that the companies will be around, it would pay for someone to loan them the money to tide them over and convince the customers. The point is that it is not the threat of bankruptcy that will drive them into bankruptcy, it is the the fact that they wouldn't be profitable even if bankruptcy driving away customers that is the threat.
Auto Companies and the threat of bankruptcy
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Oleh
abudzar
