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Does it matter if a 600 lb gorilla is Chinese or American?

Posted by lowellyarusso on April 15, 2010

In a recent post, I commented on the possibility that Toyota could “win by losing”.  The point was that Toyota’s efforts to rekindle sales through rebates, financing deals, and other inducements could lead to long term problems for, in particular, Chrysler and GM which are trying to match those promotions.  By so doing, the cash-poor American manufacturers could easily recreate many of the situations that led to their recent bankruptcy filings.

Now, we see that the U.S. government is talking about imposing fines on Toyota that would be, as reported in the April 6 Chicago Tribune, “…by far the largest civil penalty U.S. auto safety regulators have levied against an automaker.”  From a Strategic Sourcing and Supply Chain perspective, this raises a number of issues we all should be tracking. <p>

First, if, indeed, Chrysler and GM are at risk in trying to match Toyota’s use of deeper pockets to stimulate sales, one solution for their owners, the U.S. Government, is to reduce the depth of Toyota’s pockets.  A $16.4 million fine may not seem like much by itself, especially for a company that lost $10 billion over the last two years.  In this case, the point is largely about the symbolism.  For the rest of us, it raises the caution that, as the government continues to transform its relationship with the nation’s economy, there is a new gorilla in the mix and it is a lot bigger than the proverbial 600 pounder of which we usually speak. Let’s look at a few more examples. <p>

I also recently commented on the risk posed by China’s central government and its ability and willingness to manipulate the Chinese economy. Who would have thought that we need to add that risk to the mix when looking at domestic suppliers?  Not sure that’s right?  I’m not wholly convinced either but…who’s to say.  Given the push for the government to take an ever bigger role in a seemingly endless list of industries (banking, hedge funds, automobiles, real estate, etc.) there is a real risk that your assumptions about the US economy need to be reevaluated.  Is this really a free market anymore?  Or, will we have to constantly be on the alert for the possibility that people seeking reelection will replace the rational man of classical economic theory? <p>

One other thought before I close.  Who, other than the government, could own the lion’s share of two of the three major domestic players in an industry and NOT have to justify its holdings to the Department of Justice’s Anti-Trust Division?  And, who among the watchdogs will be willing to bite it’s master should the government undertake actions (like hiking import duties on cars) “in restraint of trade”?  The bottom line: Keep an eye on developments in this arena.  There may be a huge, new category of risk to help keep you focused as you work with you Supply Chain partners. <p>

To answer the question I posed in the title, if a 600 lb gorilla sits on you, I don’t think you’ll worry about what country it’s from.

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3 Responses to “Does it matter if a 600 lb gorilla is Chinese or American?”

  1. […] government ownership of key players in any industry is a major new factor in the supply chain (“Does It Matter if a 600 lb. Gorilla is Chinese or American”), and a significant  development in free markets across the U.S. and the Eurozone.  Whether […]

  2. […] expectations is not the only issue eroding margins in China.  As I detailed in another blog, (Does it matter if a 600 lb. Gorilla is Chinese or American? 4/15/10) one of the most often overlooked risks is that of shifting government policy.  In China, […]

  3. […] expectations is not the only issue eroding margins in China.  As I detailed in another blog, (Does it matter if a 600 lb. Gorilla is Chinese or American? 4/15/10) one of the most often overlooked risks is that of shifting government policy.  In China, […]

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