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What Is Good For GM & For America?

Thursday, 5 Mar 2009 | 4:44 PM ET
General Motors Headquarters
AP
General Motors Headquarters

What's good for General Motors is not good for America, and vice versa.

I don't object to the government giving GM tens of billions of dollars so it can avoid bankruptcy, or at the very least liquidation.

Just the opposite, in fact!

So what's the problem? In order to stay above water GM needs to follow through with a restructuring plan that includes laying off 47,000 workers and closing five more factories in the United States.

GM needs to fire a ton of people if it's ever going to be a profitable business again. The same goes for Chrysler and Ford . All three companies probably need to break the back of the United Auto Workers and dramatically reduce the wages of the workers who they don't lay-off.

We can save the American auto industry.

We can do that by giving GM the money it asks for and giving the company time to fire a lot of people and cut wages. But I have to wonder, isn't there a better use for that bailout money? We have a huge problem with unemployment and falling wages in this country. Couldn't we come up with a way to deal with not-so-big three that doesn't make those problems worse?

Couldn't we do something to save our parents and grandparents who have these jobs? Nothing freaks me out me more than the idea of the older generation being broke and jobless.

Look, if we wanted to, we could give GM, Chrysler and Ford a lifeline that would allow them to continue to operate in their current, totally inefficient forms. Hear me out. This would be great stimulus because it would keep people in their jobs with the same salaries, thus keeping them in their homes. We'd avoid devastating huge swathes of the midwest. And if we bailout the auto workers they can continue to bail out and subsidize their children.

But it would be terrible for the auto-makers. We'd be mandating that they become government financed zombies, little more than conduits for welfare checks that happen to also make cars. We'd be killing the auto-makers in order to temporarily save the auto-workers.

Over time as these workers retire, we gradually phase out the zombie auto-makers. Don't call it a bailout, call it a government sponsored retirement plan for the entire US auto industry. That way we get more bang for the buck. Our parents and grandparents get to keep their blue-collar royalty jobs, but we don't create any new ones. Or we could cut the lifeline as soon as we get out of the current mess we're in.

The autos are doomed. We can help them go out gracefully, causing as little collateral damage as possible, or we can bail them out just so they can thrash around and struggle to survive.

It will probably cost a lot more to go with my "turn them into zombies and keep them on life support" plan, but we'd be buying an extra dose of social and economic stability.

Right now I say that's priceless.

Questions? Comments? Send them to millennialmoney@cnbc.com

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