There would have been no lesson, in the above-mentioned instances, if the air freight volumes we handled had not soared, and the proprietors had not soon after gone into liquidation. Most noteworthy for me, in that experience, was perceiving the amplified risk in dealing with those over-leveraged into a market set to mature quickly, where moreover, the proprietors were also running a very narrow range of product lines.
In both cases cited above, I also quickly came to realise that the airlines involved, those whose revenues constituted the majority of the whole in the billed transportation services, had been fully compensated - and that we (their channel distribution partner) were left with the bad debts that unwound most – if not all, or more - of the profits earned over the duration of handling the business. This was to become one of those early fundamental lessons in my career, in respect of the reality of the underlying distribution model of the forwarder-carrier industry.
And, while decades of experience might otherwise recommend avoiding handling the business of those reliant on receiving government subsidies and bailouts, it was another of my early observations that provided a significant lesson to me in respect of exceptions and opportunism.
My employer at the time was Burlington Northern – and in the early 1980’s the CEO of the forwarding division bought into a bailout deal that saved Chrysler at the time. It was then a big deal as viewed by our fellows in a lightly capitalised industry – but it was also a marketing hit that leveraged Chrysler CEO Lee-Iacocca’s presence. This deal was also given extra impetus with the onset of the Reagan "can-do" signature presidency. Every employee of my then employer (even a soul as lowly positioned as I was then) felt a part of that bailout; & I clearly recall subsequently buying & intently reading the book “Iacocca”.
BN was to get their Chrysler money back at that time, and they gained a larger share of the business. Further, many a BN introductory sales pitch started with the line “let me explain to you what sort of company we are….” The creation of an association with a plucky well-promoted fighter, that ran a big brand company with their backs to the wall, might have been an acceptable risk – and Warren Buffet would certainly say so - if he thought government could be forced to have his back in such circumstances.
A simple story what? Well, maybe a little less clearly so, if you were to pan forward to 2009:
“Iacocca losing pension, car, in Chrysler bankruptcy”