As auditors delivered yet another message of bad news to General Motors on Thursday -- and with it the very real specter of Chapter 11 -- I thought about a recent walk I took through Times Square. There a man held a huge sign, advertising Virgin Mega Store's Going-Out-Of-Business sale.
"Up To 50 Percent Off" (on assorted CDS, DVDs, books, etc.) his poster read.
Later that day, I opened up a newspaper with a full page ad declaring one-time electronic giant chain Circuit City's final days: "Thursday-Friday, 60-70% Off; Saturday-Sunday, 80-90% Off!"
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The same day, while chatting with an older colleague, I wondered aloud: "Where will I be buying CDs and DVDs in the near future?"
My colleague has three sons between the ages of 11 and 15. He said, "Wow. I can't remember the last time we bought a DVD. We just order everything On Demand."
As an old comic book once said: "The Old Order Changeth!!"
It's well recognized that technology has initiated a tipping point in which the old production and distribution model no longer applies. People are still listening to music (legally, even). People still want to watch movies. But they don't feel the need to have that experience in the same packaging (literally figuratively). No one is calling for a bailout of music & electronic stores.
People are still buying cars. They are just not buying American cars in the same numbers they once did. The Big Three are partly hamstrung by the Ghosts of Labor Contracts Past; but the business model and consumer tastes have also changed.
The market may no longer support the Big Three American automakers. It may not support even a Big Two. The question, then, is whether it makes sense to continue throwing good money after bad. The government can't perpetually prop up these firms -- make them immune to the vagaries of the marketplace and their own poor decision.
Perhaps now is the time to for President Obama to take the opportunity presented by GM. Let it enter Chapter 11. Given the broader ongoing banking mess, let the federal government guarantee lines of credit to keep the company going.
But that's it:
Either GM will emerge from reorganization a leaner, meaner more competitive company -- or it will pass away.
Like Circuit City and Virgin Mega-Store, a GM would be missed -- even more because of the American romance with the automobile. But, in the end, allow nature to take its course -- in a way that doesn't imperil the rest of the economy.