Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, May 05, 2005

Barriers to Exit, Expectations, and Investment

Siemens, a German corporation, is losing so much money from its phone-making operations that it would be happy to pay someone to take the division off their hands. But they can't. [thanks to BrianF for the link].

GERMAN labour laws are blocking the sale of Siemens's troubled mobile phonemaking arm. Siemens is struggling to find a buyer for the loss-making division, despite the firm offering E500m ($650m £340m) - equivalent to a year's losses - to anyone prepared to take the unit off their hands.

... Siemens's trouble highlights the problems for business in Europe's largest economy. Many companies, notably in the car industry, have found German legislation makes it difficult to cut jobs or wages, or increase working hours, making the country an unattractive place to invest. Redundancy costs are prohibitively high. Giant American phonemaker Motorola is anxious to expand its European market share and industry experts have suggested that the Siemens's mobile division would be a perfect fit.

However, Motorola is believed to have abandoned discussions because of the potential labour problems that would come with the acquisition. It refused to comment.
My reading of this article is that Siemens is losing money in it's phone-making division, but shutting it down or reorganizing it would cost more than continuing to operate it at a loss.

Surely other firms see the predicament that Siemens is facing; surely this incident will lead to less investment in Germany. And just as surely, less investment means less growth and less future income for workers.
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