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« Credit, debit, prepaid | Main | If you must use cash »

Negative added value

By davebirch posted Apr 17 2007 at 8:57 AM

[Dave Birch] Cash really is a waste of money.  In the U.S.A., the government has been losing money of every new copper coin, as the costs of producing a one cent coin is about 1.4 cents.  Now, because of the cost of nickel, the five cent coin now costs 5.73 cents.  This makes minting coins an astonishingly bad business: it may well be unique in the amount of value destroyed in the production process.  I wonder if there's a business school course somewhere about managing businesses with negative added value: the final product is actually worth less than it's raw materials.

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I do remember hearing about this phenomenon before.  It was many years ago when I was teaching an MBA course in IT Management and I can remember some of the (mature) students discussing negative value in the context of the Trabant, the famous East German mass-market car which was so rubbish that building them destroyed the value of the basic raw materials, let alone anything else.  I did a quick google to see if I could find a reference to this and found that negative added value is well-known: in fact, during the 1990s, ALL of the world’s leading automobile manufacturers (with the exception of DaimlerChrysler) earned a negative added value!

You really do learning something new every day.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]


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