Tuesday, January 6, 2009

Beware of the Zombies

I remember as a kid watching the movie "The Night of The Living Dead". It might still be the best zombie movie ever. Last year, at my daughter's request, I watched it with her. Not quite the special effects and gore of today's horror movies (e.g. Saw et al), but for the vintage, it sure was enough to scare a ten year old.

I recently read an article on financialsense.com by Tony Allison that used the term "zombie" for dead companies. What a great metaphor for our three big auto companies. By metaphor, we have to ask the question "why keep these dead bodies alive?". A true capitalistic system is Darwinian in nature. Poorly managed, unsuccessful companies should be allowed to fail. Let the venture capital world fund a new company, with a young, creative management team. Let these new companies hire the best employees from the deceased Big Three. Start some new auto companies without the union contracts and without the legacy and baggage. Our politicians have basically made the decision to fund negative cashflow. Let the inevitable occur and let nature run its course.

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