While General Motors is trying to muster support in Washington D.C. for a bailout plan for the auto companies, some financial experts say that filing for bankruptcy may be the best solution for the automaker.
While a Chapter 11 filing would be painful for the company, some sources say that the bailout plan would just delay the company’s downfall and drain more money. The logic behind this being that GM needs to take steps to become a leaner and more efficient company – something it could become following the Chapter 11 process.
“Just let market forces play out,” said Matthew J. Slaughter, associate dean at the Tuck School of Business at Dartmouth. “And if GM or one of the other companies files for bankruptcy, support the workers and the communities that would affected by a bankruptcy filing.”
In the past, declaring bankruptcy has offered a fresh start to industries like the airlines, retailing, and steel manufacturers.
Rick Wagoner, GM’s CEO, clearly disagrees, saying that he believes that filing for bankruptcy would do far-reaching damage to GM and “the consequences of bankruptcy would be dire and extend far beyond” the company. G.M. will “take every action we possibly can to avoid it.”
Source: New York Times