5 ms·

Isn't is more of an existential issue? If you're a rental company, looking at ~$0 income for the next year, and the need to pay for, maintain, and garage their

Isn't is more of an existential issue? If you're a rental company, looking at ~$0 income for the next year, and the need to pay for, maintain, and garage their car fleets, then you're top priority is to shore up the balance sheet and keep your corp afloat. What the car buyer's market will be in 18mo is a more distant concern.

admax88qqq 5y ago
To a point though. Selling your only operating assets just because they're not operating at the moment seems pretty short sighted. Creditors may have forced their hand a degree, but to me it feels like a factory selling their machinery because demand is down this year. If you're going to sell all your cars as a rental company, might as well liquidate your whole company and close up shop.
- eldavido 5y ago
  The whole issue is the general prudence of taking on debt. It's a question of efficiency. Too little and you miss out on opportunities to produce and grow, too much and you're super-fragile. Over-indebted companies is a very Anglo (US/UK) and Japanese thing. There are plenty of companies in continental Europe (Germany, Italy, France) who operate with much less debt than their US counterparts. A good example is Aldi. They have no debt on their balance sheet anywhere, not even for inventory. By the standards of American business culture, that is 100% absurd. I'm really not sure who's right. It's optimization vs survival.
  - admax88qqq 5y ago
    There's also a question of just how fragile they truly were. Sure the pandemic messed them up, but that was really a once in a generation at most event. If thats what it took to sink your businessz I wouldn't call it very fragile. I also think they and their creditors made poor decisions. Selling your only operating assets in order to balance the books is a suicidal move no matter the industry. It's selling off your only way of making money. It's like a software engineer selling their workstation when times are tough.
    - chii 5y ago
      dying later is always better than dying early. And may be there's some miracle that could help that you wouldn't get if you died early.
      - admax88qqq 5y ago
        Not always the case. Dying now and cashing out is better than burning money for a few years and cashing out for less then. They paid down their debt on the cars, but they have lots of other financial obligations and operating costs that will be ongoing if they continue to operate, and they now have a hugely diminished capacity to make revenue.
    - jjhunter 5y ago
      The problem with climate change is that 'once in a generation' events are now happening more like once a decade - I would not expect this to be the last global pandemic causing major whiplash in demand and supply in our lifetimes. I'm honestly curious to find out whether most of us will even still be driving cars powered by fossil fuels by the time the next pandemic hits - as tech goes, it's only been around for a few generations. People will find other transit solutions if cars themselves get phased out. Or maybe we'll still have 'cars' with something dramatically different going on under the hood that car owners of today would barely recognize.
  - Reason077 5y ago
    > "A good example is Aldi. They have no debt on their balance sheet anywhere, not even for inventory. By the standards of American business culture, that is 100% absurd." Firstly, Aldi is a private company (actually two entirely separate private companies, ALDI Nord and ALDI Süd, who share the brand name). So AFAIK they do not publish annual financial reports like a public company would be required to do. So how do you know there's no debt on their balance sheet? Companies House filings for ALDI Süd's UK subsidiary, ALDI Stores Limited, do show debts and interest expenses so it's certainly not correct to say they "have no debt on their balance sheet anywhere"[1] [1] https://craft.co/aldi-uk/metrics https://craft.co/aldi-uk/metrics

admax88qqq 5y ago

To a point though. Selling your only operating assets just because they're not operating at the moment seems pretty short sighted. Creditors may have forced their hand a degree, but to me it feels like a factory selling their machinery because demand is down this year. If you're going to sell all your cars as a rental company, might as well liquidate your whole company and close up shop.

eldavido 5y ago
The whole issue is the general prudence of taking on debt. It's a question of efficiency. Too little and you miss out on opportunities to produce and grow, too much and you're super-fragile. Over-indebted companies is a very Anglo (US/UK) and Japanese thing. There are plenty of companies in continental Europe (Germany, Italy, France) who operate with much less debt than their US counterparts. A good example is Aldi. They have no debt on their balance sheet anywhere, not even for inventory. By the standards of American business culture, that is 100% absurd. I'm really not sure who's right. It's optimization vs survival.
- admax88qqq 5y ago
  There's also a question of just how fragile they truly were. Sure the pandemic messed them up, but that was really a once in a generation at most event. If thats what it took to sink your businessz I wouldn't call it very fragile. I also think they and their creditors made poor decisions. Selling your only operating assets in order to balance the books is a suicidal move no matter the industry. It's selling off your only way of making money. It's like a software engineer selling their workstation when times are tough.
  - chii 5y ago
    dying later is always better than dying early. And may be there's some miracle that could help that you wouldn't get if you died early.
    - admax88qqq 5y ago
      Not always the case. Dying now and cashing out is better than burning money for a few years and cashing out for less then. They paid down their debt on the cars, but they have lots of other financial obligations and operating costs that will be ongoing if they continue to operate, and they now have a hugely diminished capacity to make revenue.
  - jjhunter 5y ago
    The problem with climate change is that 'once in a generation' events are now happening more like once a decade - I would not expect this to be the last global pandemic causing major whiplash in demand and supply in our lifetimes. I'm honestly curious to find out whether most of us will even still be driving cars powered by fossil fuels by the time the next pandemic hits - as tech goes, it's only been around for a few generations. People will find other transit solutions if cars themselves get phased out. Or maybe we'll still have 'cars' with something dramatically different going on under the hood that car owners of today would barely recognize.
- Reason077 5y ago
  > "A good example is Aldi. They have no debt on their balance sheet anywhere, not even for inventory. By the standards of American business culture, that is 100% absurd." Firstly, Aldi is a private company (actually two entirely separate private companies, ALDI Nord and ALDI Süd, who share the brand name). So AFAIK they do not publish annual financial reports like a public company would be required to do. So how do you know there's no debt on their balance sheet? Companies House filings for ALDI Süd's UK subsidiary, ALDI Stores Limited, do show debts and interest expenses so it's certainly not correct to say they "have no debt on their balance sheet anywhere"[1] [1] https://craft.co/aldi-uk/metrics https://craft.co/aldi-uk/metrics