Out of Control Policy Blog

GM Should File For Bankruptcy ASAP

In my new column for Forbes.com, I suggest:

After the developments of this week, if there is any intelligent life left at General Motors, it should run--not walk--to bankruptcy court...For starters, waiting 60 days will mean it will be about $8 billion or so more in the hole given that it costs about $ 3 to $4 billion to keep it afloat for a month. Borrowing more money is not a smart move for a company whose debt--not counting its pension obligations--is already more than 24 times its market capitalization. But it's an especially bad idea to get in deeper with the government. Why? Because if GM ends up in bankruptcy anyway, the court will be able to write off its debt to unions and creditors. But Uncle Sam will take its pound of flesh. This means that GM will have less on its back to start anew once it emerges from bankruptcy.

Full Column Here

Shikha Dalmia is Senior Analyst


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