GM Bailout and Bankruptcy

Recently the government committed to putting over 50 Billion Dollars into helping General Motors through their bankruptcy, that number includes the original investment the Govt gave them earlier this year to "keep them out of Bankruptcy". The irony behind the "50" in 50 billion is that the number of jobs estimated to be saved by that investment is 50 Thousand. If you divide the Money invested over each of those persons whose jobs were saved you end up with exactly 1 MILLION Dollars per Job. Honestly is THIS the BEST way to bring GM back and save American Jobs? With the employment rate climbing every month, what about all those other people loosing their jobs? Are they worth 1 Million each as well?

From the other perspective, GM itself is much bigger than the 50K jobs that the Government is trying to save. You have to also include the Parts manufacturer and supplier of GM as well as GM only dealerships who would be affected by GM going under.

However, there are a few things to consider. If GM were to go under, and ALL 50K jobs were lost, then no longer would we be able to buy cars from them (Chevy, Cadillac, Pontiac, Saturn, Saab, Buick, Hummer, ect). So with ALL of those cars no longer being manufactured, and the number of Americans shopping for card being roughly unchanged, (Besides the 50K GM employees) all of a sudden the OTHER car companies will need to ramp up production. GM was one of THE LARGEST CAR manufactures, and ALL the other companies would need to make enough cars to make up for their Absence. So now Ford, Toyota, Honda, Hyundai will all need more Workers (And More SUPPLIES from the GM Suppliers) to keep up with demand. So they hire some of the workers GM laid off and things begin to balance themselves out.

Two questions to ponder,

1) How far should the government go to raise a failing company from the ashes? At one time being in the Typewriter business was a good thing. Imagine if the government has reached out and saved that industry. Would we still see typewriters for sale at OfficeMax next to the handheld PCs?

2) If there are 4 Struggling Movie rental stores in one shopping center and only enough people renting DVDs to support 2 of them. Does it make sense to bail out the 2 DVD stores that are failing, just to keep the employees they have employed? Or should we just let go and let the 2 that are failing, fail, and maybe the 2 that are left will pick up a few employees as their business increases.

Honestly I do feel for the employees of the automakers that are struggling. However, I just don’t see how the government continuing to pump money into the system that just isn’t working will help anything.

For tomorrow,

Some other reasons why the Government might want a controlling interest in GM.

Also How did the Union get control of Chrysler, when many economists blame the union itself for the failure of Chrysler?