Sanity Injection

Injecting a dose of sanity into your day’s news and current events.

Let GM die!

Posted by sanityinjection on November 17, 2008

Michael Levine writes in the Wall Street Journal to explain why GM is failing and will continue to fail if the federal government hands them billions in bailout money. The best solution is to allow GM to go into bankruptcy, which will force them to renegotiate bad deals and cut dead weight:

The bankruptcy process would slim GM down to a potentially viable entity that might actually be worth spending some federal dollars to support at that point.


5 Responses to “Let GM die!”

  1. tubby said

    This was a really good article. Not biased – just plainly stating the facts from an economic perspective. Good find.

  2. sanityinjection said

    And Martin Feldstein agrees in the WashPost:

    As a general rule, if you can get the WSJ and the WashPost to agree on something, that’s a pretty good sign that it’s the right way to go.

  3. Tubby said

    Jonathan Cohn makes makes some good counterpoints to the bankruptcy argument in the New Republic:
    Here are his basic points:
    – Due to the state of lending in the current economic climate, Chapter 11 bankruptcy would most likely be replaced by Chapter 7, resulting in full liquidation of the company’s assets
    – The ripple effect of all the suppliers and retailers dependent on GM would significantly increase unemployment, resulting in huge additional burdens on federal unemployment insurance. The net effects could be equivalent if not worse than a current bailout expense.
    – Improvements in UAW policies (fairer to the companies) and intellectual capital associated with long-term engineering efforts would be lost if the company went under, resulting in the loss of significant gains in productivity

    I think he raises good points that shouldn’t be ignored when Congress debates this topic, though I’m still hesitant that the bailout will work without some serious conditions written into it.

  4. sanityinjection said

    Tubby, I’ll counter with Mitt Romney:

    Whatever one thinks of Romney (and I’ve been critical of him on numerous occasions), this is without question his area of expertise, and his comments, for once, seem to represent his real views rather than being calculated for political gain.

  5. Sister Benedict said

    I own a 2008 Chevy Cobalt. Where the hell am I going to get warranty service on it for the next ten years or 100,000 miles? Awww, crap…

    Maybe the American taxpayer should pay for my car repairs?

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