Will the government really let GM go bankrupt?
Answers
265 points
fuzball answered 9 months ago …
I have to believe the Fed won't let GM go under totally. The effect of that will have serious repurcussions throughout the entire industry since such a move will greatly affect numerous down line sub-contractors and part suppliers that also service other auto makers. It could be a deal where GM will be forced to "downsize" by selling/ridding itself of some lines of products. The GMAC portion will probably get some assistance to remain viable even with Fed participation (part ownership) if need be.
I'm sure they will come up with a plan to save GM.
2222 points
readytoretire answered 9 months ago …
The government will let them go into Chapter 11, but would not like it if they went into Chapter 7. Under 11, they could get a judge to allow them to modify the contracts to help them survive. Things like union agreements, building rent, etc. are all available if the judge agrees that it would help the company survive. Like fuzball said, the government wouldn't like it due to the fallout down the line if GM disappeared, but wouldn't object if they dropped the Hummer line (good show to the environmentalists). Keeping them on life support would work in this environment, even when it would be better for the overall economy to let them go. With our big government leaning, they won't let them go completely under.
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368 points
ads answered 9 months ago …
This is a very loaded question, as I think that both fuzball and readytoretire are correct that the government isn't going to want to let GM fail, as the repercussions would be devastating to the auto industry and would have major impacts in other industries also. From the standpoint of GM's failure to adjust to the changing environment, they are about as guilty as can be, and much of the suffering they are going through right now is a direct result of that as well as being over-leveraged (which is something that the auto industry should be really careful about after the Chrysler fiasco nearly 3 decades ago). But I'd personally hate to see GM fail, as I was born only a couple of miles from GM's birthplace (Flint, Michigan) and a fair portion of my family worked for GM for 3 generations. Even though here in Michigan, the term Fragenomics™ (as coined by Philip Verges, CEO of NewMarket Technologies) applies. The “big three” have downsized and now much of the work is done by other smaller companies (the “auto suppliers”), so while GM does not employ anywhere close to the number of people that the company used to, there would still be huge cuts among the companies that supply GM. The fact that most of those companies are also sourcing to Ford, Chrysler, Toyota, Honda, etc. also does not bode well for them. If GM were to go under and all of a sudden those suppliers were to loose their number one customer (and the income they are waiting on to cover their own costs and payroll), many of them would also likely file for bankruptcy which would creating cascading effects throughout the rest of the industry.
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