Why A Bankrupt GM Is A Horrible Idea

GM logo, General Motors logo
GM logo, General Motors logo

For the past couple of weeks I've been telling viewers, readers, neighbors why a General Motor's bankruptcy is the last thing we want to see. Some have called me an apologist for Detroit. Others have said I'm clueless.

Call me whatever you like, there are legitimate reasons why I believe GM filing for bankruptcy is the worst thing that could happen to the company, the auto industry, and for the country's economy. Look at the issue from a business, and not an emotional viewpoint.

Let's start with GM. Critics say bankruptcy would let GM tear up its labor contracts, dealer contracts, and become a leaner more cost effective business. That's true. But critics ignore the fact that sales would plunge and the drop in business would be catastrophic. Spare me the argument buyers will still come in to buy Chevy's and Pontiacs. The research is clear: people are not going to come in and spend $30,000 with a company and dealer who may or may not be around in 5 years.

What about the industry? GM's bankruptcy would set off cascading chapter 11 filings as the interconnected suppliers scramble to hoard cash and work out what will or will not get paid in bankruptcy court. The smaller second and third tier suppliers will falter and the ripple through the industry will be substantial.

Which brings up the impact on the overall economy.

Even the most ardent supporters of corporate bankruptcies admit a GM filing would put a shock into our economy. Hundreds of thousands jobs could potentially disappear as hundreds of corporations see business hit the brakes. Dealers will lay off sales and service staff. Transport companies will need fewer drivers. The list goes on and on.

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Whatever your thoughts about GM, and yes, I know there are many of you who think it's a poorly run company that created these problems, don't let emotion cloud your thoughts. I'm not cheerleading for GM. Nor do I think it's too big to fail. But letting GM slide into bankruptcy is analogous to cutting off your nose to spite your face.

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