The Austerity Signal
Ford Motor Co is showing record profits after refusing government bail-out money. This highlights the importance of signaling; GM and Chrysler customers got the signal that “we’d better take the money, since we’re not sure what our future holds, who knows if we’ll be here tomorrow?”
But Ford’s decision to refuse the bailout money and aggressively re-trench sent the message, “we’re serious about improving our business and our products to win back your confidence”.
Ford won this game.