I don't understand why someone running a company would deliberately take actions to make a profitable unit unprofitable.

I intended to mean the above.  If my comments are implying that I think private business is perfect, I have not intended that.  Mistakes are made all of the time.  In fact I have worked in a very large American corporation where it seemed we had a new manager come in and take over, and after several months have a new insight that he thinks will fix the company, or division, and reorganize in order to in his mind better achieve the goals.  Sometimes the changes work, and sometimes they don't.  But I have seen a reorganization be undone, and put exactly like it was before--an admission of failure, but sometimes the people on top will try to say things just changed.  So mistakes are made, and pretty often.  I've seen situations such as you describe where it's possible to impute personal motivations to such changes--but I've generally given them the benefit of the doubt because there was a business argument that seemed plausible, though it might have later turned out to be wrong.

this one is too general to really answer.  but before even generally commenting, what does service obligations by law mean?--obligations to shareholders to achieve a profit, or something else?