It has been almost exactly a year since VP Joe Biden visited the Cree lighting company in Durham, who makes LED lights. In his visit, Biden proclaimed:
“I don’t think I’ve ever seen a success story quite like this one here at Cree,” Biden said. “It ties so much into what President Obama and I are trying to do.” (emphasis added)
Of course, at the time, I questioned Biden’s definition of a “success story,” given the Cree was being propped up by $39 million in federal tax credits, as well as potentially $4 million in state and local handouts. Indeed, a system of crony capitalism in which politicians dispense priveleges to politically-connected corporations – at the expense of the rest of us – does appear to be what “Obama and I (Biden) are trying to do.”
Today’s N&O provides the predictable follow-up story: Cree’s business is already beginning to stumble.
Cree shares fell 12 percent Wednesday after the company said its revenue for the current quarter would range from $215 million to $220 million, well below its earlier projections of $245 million to $265 million. Lower sales of LED chips and LED light bulbs, especially in Asia, drove the lower forecast, CEO Chuck Swoboda said during a conference call.
Wall Street is trying to sort out whether Cree is hitting a speed bump or is running out of gas.
Morgan Stanley analyst Joshua Paradise adopted a pessimistic tone.
“LED lighting is strong and accelerating, but Cree is losing market share as more competitors are able to produce LEDs with adequate quality for use in lighting applications,” Paradise wrote in a research note. “Several competitors are being very aggressive on price to take market share from Cree.”
“Cree management estimates they have 25-30 percent market share of the LED lighting market,” Paradise continued. “We believe either market share or [profit] margins will have to give – and maybe both.”
I wonder what Cree’s market share would be if it hadn’t enjoyed the political privelege granted by the corporatists in the White House? Perhaps Cree is not suited to be the most efficient caretakers of the scarce resources they are using, and therefore struggling to compete as more competitor enter the field. Maybe they are. I don’t know. The point being, politicians certaintly don’t know either. But that doesn’t stop them from granting political priveleges to “politically correct” and politically-connected corporations.
This is just another example of how the political elites command greater control over the means of production, more often than not directing them to uses that destroy value rather than create it. Those that favor a greater concentration of power over society’s scarce resources into the hands of the political class continue to defend the use of tax breaks and “economic incentives” for specific companies. Meanwhile, those that believe consumers (you and I) should be the ones calling the shots – based on our purchasing decisions – over how our resources are allocated will continue to voice our opposition to this corrupt and destructive system of crony capitalism.