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G.M.’s Troubles Stir Question of Bankruptcy vs. a Bailout

Posted November 13th, 2008 by Dave Culver

General Motors, with dire warnings, is seeking a bailout, but skeptics point to the benefits of bankruptcy, which can offer a new start.

Micheline Maynard, New York Times

Submitted by Evergreene Digest Contributing Editor Thomas Sklarski

Momentum is building in Washington for a rescue package for the auto industry to head off a possible bankruptcy filing by General Motors, which is rapidly running low on cash.

But not everyone agrees that a Chapter 11 filing by G.M. would be the disaster that many fear. Some experts note that while bankruptcy would be painful, it may be preferable to a government bailout that may only delay, at considerable cost, the wrenching but necessary steps G.M. needs to take to become a stronger, leaner company.

Although G.M.’s labor contracts would be at risk of termination in a bankruptcy, setting up a potential confrontation with its unions, the company says its pension obligations are largely financed for its 479,000 retirees and their spouses.

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