Evidence remains strong that ripple effects from a bankrupt General Motors would be catastrophic on the American economy and particularly devastating in the mid-western states where the majority of General Motors’ auto factories are located. The rationale behind the government bailout package for General Motors is primarily two-fold. First, it allows more time for the auto giant to determine a new business model that will make GM more competitive in the future. Second, the bailout money keeps GM operating while it attempts to negotiate new agreements with the United Auto Workers union and suppliers of parts for automobiles. The monthly sales figures of products sold clearly demonstrate the need for General Motors to entirely revamp its business in order to be viable and competitive in the world automobile market.
Keeping General Motors out of the bankruptcy courts is another effect of the current bailout. Filing for bankruptcy would force GM to liquidate its assets and have a devastating effect on both retirees and employees of the company. Suppliers would be devastated and estimates have put the job losses in the millions, if General Motors were to file for bankruptcy. Even though billions of taxpayer dollars are being supplied to the struggling automobile giant, the consensus among legislators is that a restructured General Motors will be in a better position to repay the bailout supplied to them from the government.
Key to success from the current bailout is for progress to be clearly communicated by GM to the government and the public. It is crystal clear to everyone that old practices and policies inherent in the current GM business model have failed and must be changed.
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