Thankfully Bailouts Haven't Been Expanded to Overnight Delivery Companies

Traditionally, recessions have been the market's way of pruning the excess 'growth' in certain sectors of the economy, clearing the way for the stronger names to thrive.  During the 1990s, technology stocks multiplied like rabbits to the point where the sector made up one third of the S&P 500.  At the turn of the century, the economy hit a rough patch and the tech sector crashed.  By the time the economy rebounded, most of the companies that were formed during the boom no longer existed, but the ones that were strong enough to weather the storm were made stronger and flourished (Google (GOOG) is one example).   Looking further back, the existence of the "Big Three" automakers can be traced back to the consolidation in the auto industry that took place during the Great Depression. 

In the current recession, the area of excess heading into the downturn was the financial sector, but unlike prior periods where the weak limbs were allowed to fall off and die, these weaker links are being artificially propped up.  Just like in little league where every kid now gets a trophy, or in some leagues where they have even stopped keeping score, if nobody is allowed to lose, nobody can win.  While the intentions may be good, the results almost never are.

Over the last several days, lawmakers in Washington have been debating whether or not to expand the various bailout measures such as the TARP program beyond the financial sector.  Before all is said and done, it is more than likely that the government will bailout the automakers, and just last night the Treasury expedited American Express' request to become a bank.

Thankfully, though, bailouts haven't been extended to the overnight delivery sector yet.  Yesterday, Deutsche Post, the parent company of DHL, announced that it was shutting down its US delivery operations and cutting 9,500 jobs.  After several years of trying to boost its market share, DHL decided that the continued costs of operating their delivery infrastructure did not justify the benefits of having 4% market share. 

While no one ever likes to see job cuts, in a world when we can easily fax or email documents, how many national overnight carriers do we need?  Granted, there is always a need to have an original document or a part shipped overnight, but even in boom times, do we really need four companies running four separate operations (DHL, FDX, UPS, US Postal Service) as well as other smaller independent and regional carriers?  Regarding the financial sector, various bailout programs are eliminating the usual consolidation that takes place during the downslope of the economic cycle.

Comments

[herbert hoover:]

By the time Hammering Hank is done, the bailout money will be available to FedEx too. After all, if American Express is a bank, why shouldn't Federal Express be one too?

2008 Nov 11 04:46 PM

[ixdaveb:]

that has to be the most ridiculous point of view I have ever come across. Why stop there? Do we ACTUALLY need McDonald's AND Burger King?!
It's called free enterprise and by eliminating competition you promote monoply which leads to higher prices. You would almost be forced to believe Sarah Palin wrote this article...."Regarding the financial sector, various bailout programs are eliminating the usual consolidation..."??!!!
What ?!!! There has been in the financial sector ALONE, almost 300 Banks & Lenders that have gone out of business...no consolidation there, just plain old bankruptcy or worse. Do everyone a favor and write something meaningful......your heading and content suggest you are merely using another companies (and thousands of employees with families) economic demise for your own benefit. 9,500 jobs are lost and you are comparing Google to it?

Seems wrong to me.

2008 Nov 11 05:33 PM

[k9s-4-k8:]

Maybe the New York Times will prepare their case for a bailout. The Democrats owe them big time.

2008 Nov 11 06:26 PM

[Alex Filonov:]

DHL is a German company. Would reaction be the same if, for example, UPS is folding?

2008 Nov 11 11:30 PM

[Steven Hansen:]

9500 jobs gone with DHL - a very well run company. not like GM. i am surprised because DHL is really the #1 company between countries. this spells the beginning of the end for DHL.

nothing to celebrate - capitalism at work. not too big to fail. i hope we can be as relaxed when automakers bite the dust.

2008 Nov 12 01:00 AM

[bbowen7:]

Thankfully, this morning Paulson articulated a few boundary-drawing principles of what he sees as the spirit of the agreement with Congress enshrined in the Troubled Asset Relief Program:
1. The TARP is to be aimed at the financial industry.
2. It is intended to make investments or buy assets that could have a return to the taxpayers.

Now, he could change his mind tomorrow.

2008 Nov 12 01:27 PM