Should we let GM fail?

General Motors is now teetering on the edge of bankruptcy. It currently has about $16B in available cash but its burn rate is close to $2B per month. When you add to this the fact that the majority of Americans will not buy a car that is made by a struggling company due to potential warranty and service issues, you create a negative feedback loop that will likely bring GM down.

This is nothing new. I wrote about GM's problems over three years ago. All auto companies, including the venerable Toyota, are hurting now. But American companies are even worse off. Why? Because of the union contracts they've had for the past half century, including the socialist JOBS BANK, which pays workers to sit in a room and not work. GM complacency during boom times gave the union these types of benefits that are practically unheard of in any industry.

It is not so simple to just allow GM to fail. If GM goes under, parts suppliers will probably have to close as well, which has the potential to hurt the other automakers. Furthermore, close to 10% of US jobs are in someway connected to the auto industry, when you include dealership personnel, parts manufacturers, and the entire dealership industry.

What they want is a couple dozen billion dollars to continue operating, but I'm not sure that would do any good. I think that a bankruptcy may be their best chance at survival, as that would allow them to renegotiate a lot of their contracts, likely including their UAW contracts.

I don't have any quick term solutions to propose and neither does our current president. Our next president favors a bailout, since you don't want to start your term presiding over a meltdown just as bad as the financial crisis.