With apologies to whoever said it, the moral of the financial crisis was "Don't loan money to people who can't pay it back." That goes for the auto industry as well as home borrowers.
Mitt Romney makes a similar point in his NY Times op-ed.
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Trying to stave off bankruptcies is like trying to avoid recessions, bad policy. They're not pleasant, but they have to happen, and the longer you postpone them, the uglier they get.
I don't often agree with Mitt Romney, but he does speak with authority here. This is what he did for a living; Bain and Company was a management consulting firm and Bain Capital was an equity investment firm. I don't like equity investment industry, its emphasis on the bottom lines and short-term return on investment is at the root of many problems in American business right now, but the issue here is truly GM's bottom line, just as Romeny argues in his op-ed.
GM is fighting to survive in its current form, but proponents of the bailout--the people citing statistics about jobs and tax revenue lost--are arguing for things that don't necessarily require GM to survive in its current state. GM's leadership is trying to blur the distinction between those two things.
For instance, GM is arguing that customers will not buy cars from a company that is in bankruptcy, but I would argue customers are less likely to buy cars from a company that is in denial of reality. GM's customers know that the company is on the verge of bankruptcy; every news agency is reporting it. What is most likely to reassure customers is when experts are able to explain what form the company will have in the future. Uncertainty is what truly ruins markets, and denial of GM's need for bankruptcy just creates and prolongs that uncertainty.
Solarworld's offer to buy Opel, a German division of GM, gives evidence that liquidation is bad for GM but not necessarily its workers. There is a market for energy efficient cars in Germany, people will have to build those cars, and GM's workers will end up with many of those jobs. GM dismissed the offer as not even worth considering, and industry analysts also seemed to dismiss it, but that's not the point; it's a reminder of how liquidation works. The elements of the company that have value will continue to exist. GM shareholders will lose money, but the investors that buy up its scraps will eventually profit.
Remember, the automakers fought in court alongside the Bush administration against California. They are a bad actor, just like the Bush administration. If the company is liquidated, its various elements will take new forms. Because there will still be a market for American-made cars and for GM parts, American workers will continue to make those cars and parts. But GM's leadership, like the Bush administration, like Rep. Dingell who looks out for the automaker interests and hopefully will lose his chairmanship to Waxman, like so many of the bad actors of the last eight years, will be out of the picture. I don't pretend to know everything about how a managed bankruptcy would play out, and I don't argue that a lot of workers and contractors to GM would not be hurt, but bailing out GM seems to ignore the lessons of financial crisis.