GM Cannot Fail

In an interview on CNBC, billionaire investor Wilbur Ross spoke of how a GM bankruptcy is not an option as opposed to government financing. He was not as concerned about the employees of GM itself and the losses associated with an isolated GM failure, he was more concerned with the auto suppliers supplying parts to the company. There are four times as many employees in the supplying sector then in the big car companies - about three quarters of a million. If GM or any of the other big car companies were to go bankrupt the suppliers would have to write off 10% of this years receivables. Few suppliers would be able to handle this and would be forced to shut down and would then cut off supplies to the other car companies. He claims the car makers problems were the southern states allowing subsidized transplants for the Japanese, Koreans, and Germans taking $35/hour jobs from the North and creating $17/hour jobs in the south. It helped the states, but hurt the nation as a whole in coordination with a poor national economic development policy. The country would not be able to stomach the failure of GM and its connected suppliers but I still see the government trying to keep an industry alive that is doomed to failure. Even if there was a restructuring to allow more fuel efficient cars or cars not dependant on fossil fuels to be built, would the suppliers not be out of business anyway? There was simply not enough planning and no account for a world demanding more and more oil. The best the company can do now is accept government assistance to use its existing manufacturing capabilities and, as quickly as possible, change its entire production line because it is unsustainable in its current form.