Weekly Puzzle #13: The Auto Business

What is it?

In my post on GM, I argued that the auto business was an awful business to be in and how investors and some CEOs seemed to be in denial. In this week's puzzle, I present two of the most refreshing posts that I have read in a long time. The first is from Fiat's CEO, Sergio Marchionne on the sorry state of the auto business and what investors need to push for, in order for it to change. It is one the most insightful and honest posts that I have read from a top manager in a bad business. The second is an equally surprising and insightful response from an auto analyst on why investors have so little power to change companies in bad businesses. The twin articles provide perspective on one of corporate finance's most challenging questions: why do companies in bad businesses continue not only to exist but to grow?

  Key Questions to Answer

  1. Do you agree with Sergio Marchionne's assessment of the auto business?
  2. Assuming you do, why do you think that companies in this business continue on a path of self-destruction?
  3. Speaking as an investor, do you agree with Max Warburton about why investors have little power to force change in this business?