General Motors should be allowed to go bankrupt. - Inspired by Michael E. Levine

In a WSJ op-ed, New York University Law professor Michael E Levine argues that, GM's decline is inevitable and the company should be allowed to go bankrupt.  

The costs of tackling GM's problems, he argues, are huge. "After 42 years of eroding U.S. market share (from 53% to 20%) and countless announcements of  'change,' GM still has eight U.S. brands…(and) about 7000 dealers." Toyota on the other hand has three brands and fewer than 1,500 dealers.

"GM knows it needs fewer brands and dealers, but the dealers are protected from termination by state laws. This makes eliminating them and the brands they sell very expensive. It would cost GM billions of dollars and many years to reduce the number of dealers it has to a number near Toyota's," writes Levine. "The cost of terminating dealers is only a fraction of what it would cost to rebuild GM to become a company sized and marketed appropriately for its market share. Contracts would have to be bought out. The company would have to shed many of its fixed obligations. Some obligations will be impossible to cut by voluntary agreement. GM will run out of cash and out of time."

Even if the federal government agrees to a bailout, much of the cash will be routed to unproductive areas, argues Levine. GM will inevitably be back for more and more assistance.

Slate's Daniel Gross argues differently. He acknowledges that GM is a disgrace, however states that the company should be bailed out: " General Motors wouldn't be a typical bankruptcy. GM's management argues that the very act of filing for bankruptcy eliminates the possibility of recovery since people would be reluctant to purchase expensive, long-lived assets (cars and trucks) from a bankrupt entity. And because of GM's size and the place it occupies in the supply chain, the company's failure would likely trigger the bankruptcy of hundreds of suppliers and other companies that rely upon it."