2 min read

Time to pull the plug on GM?

President Obama is nearing the most important decision a President has made in modern times regarding the American economy. On or about June 1, he will push General Motors (GM), the nation’s largest industrial company, into bankruptcy.

via Why a GM Bankruptcy Would Be a Disaster — BusinessWeek.

Let’s be honest, President Obama has put his hand in many parts of the economy over the last few months, but he is not pushing GM into bankruptcy. The economy is pushing GM into bankruptcy. If Obama does nothing, GM will go bankrupt. If government had into already intervened, it would already have gone bankrupt. GM was going into decline before the economic downturn even began. A lot more businesses should have been allowed to go bankrupt, and I think GM is a good place to start.

Yes, this will be incredibly painful — but the recovery will be one way or another. We can have or pain now and move on, or push it off and make it bigger. If the government continues to prop up GM, we will be pumping up more and more into a house of cards that will likely fall whenever we pull the plug. At that point, not only will we have the same problems a bankruptcy would have today, but we would also have squandered billions keeping it on life support. I think we have already thrown enough money into the black hole that is GM. It’s time to face reality, let GM fall, and use the money to help its stakeholders transition to a post GM world.

Another excerpt:

Then the government should get out of the way and let management execute on its plan, with continued loans for a period of months, not years. Obama should proclaim that, in view of the dramatic progress that management and the union have achieved, the threat of bankruptcy has been lifted and that it’s time for Americans to at least consider buying GM cars in view of their dramatic improvements in quality, cost, and design. He should be helping to create confidence in the future of GM, not destroying it. If he sincerely wants GM to be in position to help him achieve the fuel-emission goals he has established, he must not allow GM to get bogged down in a protracted bankruptcy.

via Why a GM Bankruptcy Would Be a Disaster — BusinessWeek.

Apparently, the role of the American president is to be cheerleader for American corporations, bankrolling them and standing back in support the way a parent watches over his child’s lemonade stand. GM is dead. It was dying before, and it is dying now. A few months loans won’t be enough to help new management change. GM hasn’t yet been able to make improvements in quality, cost, and design, how could they on their deathbed?

Fuel efficiency improvements doesn’t depend on GM’s existence. The author is trying to scare us with half thought assertions and painful truths, but the end is unavoidable. GM will not exist as it is now, it needs to go into bankruptcy and significantly downsize and restrucutre if not completely liquidate.