Auto Bailout: The Government Puts GM Through A Stress Test Too

February 18, 2009 By 2 Comments

GM will get its $4 billion loan payment from the government today but the company is nowhere near being off the hook.

Bloomberg reports that GM must also present a progress plan to the U.S. Treasury tomorrow that shows progress in cutting labor, debt and other expenses to prove the automaker can restructure to become viable and repay the loans by the end of 2011. If GM doesn’t show progress, the loan terms allow the government to recall the money or force the automaker into a government-supported bankruptcy.

Now that sounds like a much more reasonable stress test to me than the bank bailout plan. Fair’s fair.  If you can’t survive then it’s reasonable to file for bankruptcy.  But effective nationalization…well that’s neither here nor there!

Image credit: Bloomberg

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  • http://www.thecontrapuntist.com Miguel

    What I really want to understand is why can’t GM be broken up? If they have a new model, why can’t each brand be made into its own business. Allow the better brands to survive and the weaker one go away if the don’t make the cut.

    It is clear that big business is the biggest problem here. If GM was smaller is size, then bankruptcy wouldn’t even be an issue.

    I fail recognize why any industry should get bailed out. GM has a failed product that lacked in innovation, which is why people don’t want to purchase their cars. They suck, at least that is the perception. And that perception isn’t likely to go away anytime soon. Which mean no car sales… leading to the entire company failing in the end.

  • http://www.thecontrapuntist.com Miguel

    What I really want to understand is why can’t GM be broken up? If they have a new model, why can’t each brand be made into its own business. Allow the better brands to survive and the weaker one go away if the don’t make the cut.

    It is clear that big business is the biggest problem here. If GM was smaller is size, then bankruptcy wouldn’t even be an issue.

    I fail recognize why any industry should get bailed out. GM has a failed product that lacked in innovation, which is why people don’t want to purchase their cars. They suck, at least that is the perception. And that perception isn’t likely to go away anytime soon. Which mean no car sales… leading to the entire company failing in the end.