GM rules out bankruptcy

GM has been ruling out bankruptcy as an option for a long time now and the company is still betting on a US government bailout as its best chance for surviving through 2009.

But review of the option by the GM board may just be a political ruse to drum up support for a bailout.

Of course, companies don't like to declare bankruptcy, especially the board members that run those companies because they are the first to lose out.

But many analysts believe a well ordered bankruptcy with a detailed plan for restructuring and recovery may be the best bet for GM in the long run.

GM's (and Chrysler, also on the brink of collapse) say that bankruptcy is not an option because it would destroy consumer confidence in their brands and collapse sales to a level that makes any continued existence of the company un-viable.

Here they may have a point. No one really knows how consumers would react to a bankruptcy. There are examples of companies that have gone through Chapter 11 that were makers of consumer goods who were able to maintain sales at tolerable levels throughout the ordeal. But none of those were big ticket item makers like auto manufacturers. It is a huge question whether a buyer, especially in today's uncertain times, would put down 15 or 20 or 25 thousand dollars on a product built by a company which may no longer exist in six months' time.

Source: WorldCarFans.com

Credits: Jarvis