Why is GE failing?

[kennedy]

Day after day, I hear about the credit crunch at GE. They've got no cash, none of this, none of that, and I wonder-why? They're full of innovation, probably one of the most innovative technology companies in the US. They've got a beautiful website, marketing, and public relations. They own NBC-my personal favorite broadcaster, along with various other companies. Why are they in so much trouble? I'm not an economic genius, but my gut tells me that if GE can't survive (or excel), who the hell can?

 

[jass]

Its not the reason, but NBC is having their worst season in years...

 

[unterbau]

nobody's watching 30 rock, i guess

 

[JohnAKeith]

I know nothing about this whole subject, but is the problem with GE Financial, not GE? If so, the problem is a result of credit, just like GMAC and Chrysler Financial.

 

[kmp1284]

Very simply, it's a combination of the obvious issues with the financial arms(GE Commercial Finance, GE Money) and to a lesser albeit large degree the drop off in purchasing of consumer and industrial durables.

 

[kennedy]

I understand the money portion of the issue, but why aren't consumers buying GE products? Quality, innovative, beautiful products...that don't sell. Shouldn't GE be able to lean on the consumer/industrial products when the financial business isn't healthy?

 

[KentXie]

It doesn't matter how good a product is if nobody wants or afford to buy it.

Here's a supply and demand graph. Assume the labels are changed so that demand is the amount of people who would buy it and supply is the amount of available goods:

The equilibrium (at point C) is the price at which it can make the most profit and shows how many consumers can buy the product at that price. In the current economic system, the demand curve shifts to the left because of lower demand (as shown). Thus the current price does not make the most profit, and could even be a deficit. Until the price is lowered, then the products won't sell as well.

Also, this graph does not include other factors such as average cost, variable cost, etc which also determine at which point the product becomes unfeasible at a current price.