Wednesday, June 16, 2010

 

TOO BIG TO FAIL?

It was once a Goliath of Biblical proportions and North America's largest corporation. But; General Motors failed and needed massive government handouts from the United States and Canada to survive.

In an unrelated post ten or so days ago, I opined on the challenges and difficulties of predicting the future by gazing through a crystal ball. There is extreme volatility in the global economy. The volatility is reflected almost on a daily basis in the wild roller-coaster fluctuations of the world's major trading exchanges when investors react nervously to each rumour and new issue.

One ominous sign is over the exchange of words and public spat between the United-States and Great-Britain over the plunging stock prices of that country's industrial Goliath: The giant petroleum producer BP, which is Britain's largest corporation.

It no longer seems too far fetched to foresee that along with the "speed of light" Internet social media commentaries; the Gulf of Mexico disaster which is playing-out daily on the television screens of the world, could eventually threaten the very existence of the BP Corporation. Not only has the giant oil producer failed at each effort to contain the worst oil spill in North American history. There is no applicable precedent for the situation BP now finds itself in. Experts in Crisis Management believe the company is even failing spectacularly at managing the issues over which it still has some degree of control.

From its own gasoline retailers in the United-States and abroad and on up; BP has failed to stop people from losing faith; and much more importantly losing money in the corporation. Share values have collapsed close to 50% since the oil rig explosion on April 20 erasing as much as $80 Billion of BP's value. The Obama Administration is making it clear in an increasingly aggressive manner that it holds BP accountable for a clean-up effort which could go on for decades; and which some Wall Street analysts say could be more than $50 Billion and still counting.

Most every public and private pension fund in the United-Kingdom owns a bit (and frequently much more) of BP. Because of the current public backlash some British analysts believe the company's operating position in its largest market, the United-States..."could become untenable."

Fearing the collapse of BP, the British government could be faced with just two equally disastrous choices: a) Bail-out the company to keep it from going under; b) Allow it to collapse under the weight of the Gulf Coast mess. Because of the state of the weakened global economy, either scenario would result in a world financial and economic crisis which, like the oil spill clean-up, would reverberate for decades.

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Comments:
I agree with your comments. My biggest fear is the people responsible for this disaster are going to walk away in the end because this company is going bankrupt.
I commented on a CBC article the other day about this issue saying the real people at fault were George W. Bush and Dick Cheney. If they had tighten the regulations we may not be in this mess. But then again look at these twos history Big Oil. Also the Iraq War was not about weapons of Mass Destruction but about oil.. Halliburton and former CEO Dick Cheney. I am I paranoid? I don't think so.
 

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