When you stop making money - or find better opportunities to make money - you might decide to close down or move. GM no longer makes trains.
When I was at the tender age of 18, I went to work for General Motors Corporation, then the largest automobile manufacturer in the world. Not only did we make cars, we made the world's largest dump truck (Terex Titan), locomotives (Electromotive Division), refrigerators and other appliances (Frigidaire) as well as a host of other products and aftermarket parts. You no doubt recall Delco batteries, AC Spark Plugs, as well as other products we sold.
I went to work for New Departure-Hyatt Bearings Division, in Bristol, Connecticut, now famous as the home of ESPN - which has its own set of troubles. Maybe the place is cursed. At the time, our obscure division was losing money and our factory was losing the most in the division. But to hear the hourly employees tell it, "GM will never close this place! They have too much invested!"
But in the next few years, various divisions were sold off or spun off or closed down. Frigidaire went away - becoming a brand in someone else's portfolio. Terex was sold as was EMD. GM don't make trains no more.
But even in the car division, factories, brands, and divisions were sold off. Delco became something called Delphi. And other various divisions were closed or sold to venture capitalists, management buyouts or IPOs. GM bought parts from whoever made the best quality at the best price - that could be a former GM parts division, or not. Like its Japanese counterparts, the "big 3" automakers in America became auto assemblers - putting together parts from a number of suppliers. And even then, GM still went bankrupt - emerging even smaller with a much narrower product line.
The auto world in America underwent a dramatic change.
So pardon me, if I am skeptical when some low-level laborer says, "they'll never close this place!" because when someone says that, usually the closure is right around the corner. Remember America's shopping malls? They seemed permanent as well - made of steel and concrete. But one by one, they have closed and been bulldozed or repurposed for other uses. They became unprofitable when people stopped going and overhead was too high.
Could the same thing happen to Disney? After all, it is a colossus in the entertainment and theme park business, even if the streaming service is losing money. Well, I doubt Disney will go bankrupt, but it is possible they may refocus their energies if they feel one or another park is not performing up to snuff, or if the cost of operating the parks gets too high.
The reasons GM closed New Departure in Bristol were many. We were paying UAW wages which were twice what the union metal workers were making at a competing plant down the street from us. This, in turn, was twice what non-union workers were making. Topping that off were ridiculous work rules, which I wrote about before - several times, in fact. In addition, the State of Connecticut and the County felt the factory was a cash cow to be milked. Twice a year we had to inventory every part in the process of production in order to pay "property tax" on it. Never mind that we paid a host of other taxes - and provided thousands of jobs that generated income taxes. We had to count every ball, every race, every cage, ever seal, and pay taxes on it all - as well as all the machinery that filled up 22 acres under one roof.
Meanwhile, in Japan, the workers will work through their lunch break to make sure the assembly line doesn't go down, and the factory and its products are seen as the pride of the country, not something to be exploited for a few bucks. Closure was inevitable for our factory.
But what about Disney, and in particular, Disney World? Governor DeSantis is making Disney's life miserable simply because they exercised their free speech rights (because, under Citizen's United, corporations have free speech rights, too!) and he wants to punish Disney for disagreeing with him (no Autocrat, he!) by making it more costly to do business in Orlando.
Sounds like a GM factory about to close!
But Disney World is so profitable! They'll never close it! Remember what I said about that phrase?
Numbers are hard to come by, mostly because the idiot Internet confuses revenue (gross income) with profits (net income) - and don't get me started on EBITA (which stands for "How much money we could have made if we didn't have to pay taxes or interest or our employees or suppliers.....") - it is a made-up nonsense number. Some say Disney is "making" 78 million a day on the theme park, while others claim it is less than one-third that amount.
Sadly, journalists (I use that term loosely these days) like to toss around huge numbers and confuse readers with terms like "revenues" and "earnings" instead of "gross income" and "net profit" - which are more to the point. One of the links above claims that operating costs are a paltry 25% of revenue. If this is so, they have an astounding profit margin of 75% - which I doubt is the case.
Disney World has about 58 million visitors a year. Assuming this $25 million gross income per day is accurate, Disney is taking in $9.125 BILLION dollars annually. Divided by the number of visitors, comes to about $157 per visitor per day. I guess that is not an unrealistic number. Actually, that seems kind of low. But I still doubt their overhead is only 25% of income.
Others point a more dire picture - that attendance is OK but that profits are falling. If so, this could spell trouble for Disney, entering a recession. And like our ball-bearing plant, Disney creates a "halo" effect in the greater Orlando area - which supports not only competing theme parks, but many hotels, condos, and timeshares. A friend of ours asked us to join them at a timeshare they rented for themselves and their kids. They flew all the way from the UK to visit Disney (among other places). The timeshare itself was almost a destination - with its own waterpark and play land. We had a good time there. It wouldn't have existed without Disney.
If attendance falls off or costs spiral out of control, it could turn profits into losses. And I doubt that "go woke, get broke" is going to be the cause. Survey after survey shows that the majority of Americans support more liberal causes, whether it is legal abortion, gay marriage, or legalizing marijuana. Conservatives are in the minority and stay in power (until recently) only through gerrymandering and the electoral college. If their representation was actually proportional to actual voter support, Democrats would have huge majorities in both the House and Senate. Then again, maybe this is how the system was envisioned to work - to prevent the majority from steamrolling over the minority. Perhaps.
Disney and Budweiser aren't dumb - they know their demographics. Disney knows that "Gay Day" is a huge draw, even if it isn't an official Disney holiday. Cruise lines know that Gay cruises sell out and often run out of liquor halfway through the cruise (forcing them to restock in foreign ports). Budweiser sees the writing on the wall - the boomers are dying off and the next generation is profoundly different. There is no profit in chasing racist, retrograde customers who are in a walker or electric scooter and only months away from their final resting place. That's literally a dying demographic.
We visited a gay campground in Florida a few years ago, and they were having the "Miss Drag Florida" contest, so we bought a couple of beers and decided to watch. Unlike a lot of campy drag shows (which are also fun) these were very serious performers who could have passed a women even after careful inspection. But what was amazing was that each performer had their own backup dancers - a half-dozen or more! I asked another attendee where they found dancers who were willing to perform like this - in carefully rehearsed routines. "Oh, they are all dancers at Disney!" he said. So you see why Disney took the stand that they did - the place is very, very gay.
But I digress.
The real threat to Disney is DeSantis making Florida an unattractive place to do business - ironic for a Republican who is supposed to roll over and play dead for any business of merit. Fold in the violent crime that seems to riddle the State ("Florida Man!") and various firearm-related incidents, and you start to scare off the tourists. August in Florida is already nauseating and humid - with global warming, it will only get worse. How long before Disney starts looking at new locations for future expansion?
We see people drive by on I-95 from New York to Florida to visit Did-ney. It is a long drive. Why not shorten it by more than half with a theme park in Virginia? Disney already tried that once - maybe next time they won't appear so tone-deaf about it. Speaking of the failed Disney America, one reason Disney pulled the plug on that project was the money they were losing with EuroDisney (now "Disney Paris") which has a fraction of he visitors and revenue that Disney World has. (Once again, finding profit numbers is hard on the Internet, as websites gleefully report gross revenue and not net profits).
And it is not like amusement parks have ever closed before - in fact, the world is rife with closed and abandoned amusement parks that just didn't work our or became unpopular over time. Disney in fact has abandoned or torn down entire sections of their park and rebuilt them when rides or attractions became dated or attendance faltered. Remember "Downtown Disney?" Gone. Entire YouTube channels are devoted to abandoned amusement parks and rides, including abandoned or torn down Disney attractions - Defunctland is a good example.
Like the ball bearing plant, it may seem like a huge investment in capital, but the reality is, most attractions "earn" their construction costs back within a few years or even months. After that, it is pure profit and after that, well, you can afford to walk away or tear down and start over - such is the nature of the theme park business.
So, what's the point? Well, to begin with, things that seem permanent and colossal are often ephemeral. It may take a while, but when rot sets in, it is hard to eliminate. I left GM in 1981 and it was another 25 years or so before it went bankrupt - the seeds were already sown back in the 1970s. Florida is becoming more and more of a toxic State, and the horror stories of people being shot for no reason whatsoever or gays being targeted by legislators or "sovereign citizens" is enough to make anyone think twice about going there. Cut off the wrong car and you are shot to death. Even if you drive too slowly for someone else's tastes, you get shot. That is real crime, but Republicans refuse to do anything about it because of "second amendment rights" (which today apparently means shooting the pizza delivery boy when he shows up at the wrong address). But abortion or drag shows? They have those threats covered.
Pretty clever when you think about it - if you can't solve real problems, invent fake ones, declare the war won, and go home. You can never lose playing that game - except perhaps at the voting booth.
It is not like it would happen overnight, but Disney might think long and hard before investing more in Florida and perhaps look northward to friendlier States that are closer to population centers and where the weather is not so scorching hot during half the year. Like I said, Virginia is a day's drive from New York or two days from Boston - and a few hours from the Nation's Capitol. Maybe "Disney America" was poorly timed and poorly located, but there are other parts of the State where there is a lot of land available, fairly inexpensively, and the State is more business-friendly than Florida these days.
We like to - or liked to - visit Florida during the coldest months of the year. But lately, it seems the bloom is off the rose. While there are many back roads, such as 301, which are not heavily traveled, the main roads, in particular I-10, I-95, and the infamous I-4, are so crowded with angry people that it is just unpleasant to visit there. They have signs up on I-4 advising you to removed bloodied bodies from the roadway so as to not impede traffic. Secondary roads through towns and cities are even worse - you look at someone sideways and they will shoot you. People are hostile and angry and the State is overcrowded with the worst sort of belligerent people. It is not the relaxing tropical paradise it once was - most tropical paradises aren't, anymore, it seems.
How long before Disney gets the message they are not wanted and pack up and leave? - not all at once, of course, but piecemeal like GM did - selling off divisions and building new assembly plants, in Mexico. Maybe it could happen, over time, if the State keeps trying to punish the company for expressing their opinions. It certainly would make many other companies think twice before locating there.
That is the conundrum of the "Sunbelt" boom and the "red state" business trend. Low taxes are fine and all, but if the electrical grid isn't reliable and the roads are potholed and random shootings are the norm, what's the attraction to live or work there?
Just a thought.
UPDATE: A reader writes:
I'm sure Disney is carefully considering options. Even if they don’t move now, they could announce that they had signed a deal to move to another state at a critical point in the election cycle. That would be huge news, followed by much analysis about how this would very negatively affect Florida’s economy. DeSantis bankrupts Florida, do we want him as president?
In the late 70’s I lived within range of the local Detroit news, and it seemed like every night they interviewed a UAW worker standing in the driveway of their brand new house, in front of their brand new car and boat, complaining that they couldn’t afford a $1/hour cut in pay …. and considering the debt, they were right. Meanwhile I screamed at the TV “I’ll take your job for $1/hr less!”
