Monday, January 12, 2009

Circuit City May Become First Major Victim Of The Deep Recession

With the sinking economy, and disappointing Christmas sales. some major American businesses are likely to start dropping like flies very soon. Circuit City might be one of the first victims to fall if the company cannot find a buyer by Friday. Things are just that desperate for many American businesses.

On paper, Circuit City looks like just the sort of business that should prosper. The company always has a great advertising supplement to the nation's Sunday papers with many great specials and near loss leader bargains with some items priced at rock bottom levels. But apparently not even that seems to be working in this poor economic environment.

Circuit City should also be enjoying a sales bounce as many families rush to upgrade their TVs to digital models before the February 17 deadline. But even that doesn't seem to be working for them right now. And laptop computer prices have sunk to bargain levels as well, yet even that doesn't seem to be working in favor of Circuit City either. In other words, the company is doing everything right. But in this very poor economic environment, nothing seems to be working as well as it should to make Circuit City viable.

That is a large part of the frustration of many in the business community right now. No business formula seems to be working very well right now for many companies. What works well in a good or fairly stable economy just isn't working in this rotten business environment for many businesses.

Hopefully a buyer for Circuit City may come by Friday. But that's a pretty slim window of hope. Circuit City might just become the first of many failures of perfectly good businesses that just cannot survive in this huge economic slowdown environment that is so bad that giants like GM and Chrysler are on the ropes as well. If a steady drip-drip of major business failures starts soon, as many expect might well happen, then the American jobless picture might really worsen dramatically despite attempts by the new Obama Administration to shore up the economy. That would be a real nightmare.

A major company like Circuit City might just be a canary in the coalmine. If they fail, then many more failures might also just be right around the corner as well. That's pretty depressing. But this is the deepest economic mess since the Great Depression. And that mess ruined many great American businesses including luxury car brands like Auburn, Cord and Duesenberg. This deep recession will likely leave a graveyard of major business failures as well. And that's very sad because of not only the human cost of the lost jobs, but the capital difficulties of putting together new major companies.


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