Tuesday, 5 May 2009

Two Business Conundrums

The possible takeover of General Motors' European operations by FIAT and the ongoing debate about the fate of Royal Mail have caused some interesting headlines.

Having worked in commerce for many years, I don't see too many alternatives. the motor industry has had an excess of capacity for years and some sort of shake out is inevitable. Some factories will have to close. The world simply produces too many cars. It will be very sad for the workers affected, but the shakeout needed to happen some years ago. What I don't understand is why FIAT would want to acquire any part of Chrysler which seems to have no future whatsoever. Their cars are awful... why would any company want to take that on?

The Post Office (brand name Royal Mail) is simply not structured (and probably never will be) to cope with a market in which the demand for letter is reducing by 8% or more each year. The only way to cope with such a downturn is to reduce the size of the company (cost base, workforce, overheads etc.) in advance, and with a universal obligation to deliver mail anywhere in the country for the same price, it seems completely impossible that our postal service would ever have been able to do that. So, so other solution is now required. The Government (supported by the Conservatives) is looking for a partner, to inject money and provide management expertise. I would have thought that any company with real expertise would not touch Royal Mail with a bargepole. I know I wouldn't. The the obligations they have, coupled with the constraints of rising prices and the relationship with the Union of Communications Workers, it would be a nightmare.
It seems to me that we voters have to decide whether we are prepared to live with a lower level of service than we have now e.g. deliveries twice a week, or are we prepared to pay an economic cost of postage? It looks very much as though we shall have to choose one or the other, because it seems inconceivable that the taxpayer should continue to subsidise the Post Office as it has been over recent years.

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