A grand Chapter 11? Ask Circuit City

For those who think a nice, neat Chapter 11 bankruptcy would be good for what ails the U.S. auto industry, here’s a story:

Over Christmas, my wife and I decided to replace our digital camera (which is 5 years old and therefore the size of a small outbuilding) with a new, smaller camera.

So geeked up on caffeine over coffee at the bookstore, I said, “Let’s just go up to Circuit City right now and get it over with.”

She gave me the sympathetic look she gives old people who are out of touch.

“Uh, they’re bankrupt,” she said.

“So?”

“They’re closed … aren’t they?”

Well, no. They weren’t closed. Since Nov. 10, the company was operating in Chapter 11 protection.

“Do we want to buy a camera from a place that might go out of business?” she asked.

“Who cares?” I said.

We bought the camera at Circuit City. It’s great. But if she had been doing the shopping, Circuit City would have lost the sale.

Apparently, Circuit City has lost a lot of sales. Today it declared that it’s liquidating. The “Everything Must Go” signs are being posted.

Chapter 11 reorganization didn’t save it.

Imagine a Chapter 11 for a troubled domestic car company. Imagine if even a small percentage of shoppers thought that “bankruptcy” meant either that the automaker was closing, or in imminent danger of closing.

How long would it take before the automaker liquidates?

Not very long.

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