Tuesday, November 11, 2008

The fate of GM

Ezra Klein agrees with what I posted earlier about the possibility of bailing out GM:
But what's the end game here? Depending on how you understood the financial crisis, the banks were either suffering from temporary illiquidity or insolvency. The problem was, in either case, transient, and not tied into to the fundamental business model. Buttressing them in the short-term would allow them to survive and return to prosperity in the medium-term. But GM's decades-long decline is a consequence of its business model. They've been in freefall for years now. Saving them in the short-term probably just means they die in the medium-term, or maybe are saved again. Presume the government does extend the loan. Then what? What reason is there to believe that GM is simply enduring a temporary solvency crisis rather than simply dying?
Save the workers. Save the communities. But unless GM comes up with a plausible turnaround plan, they can't be saved.


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