In the Simon Johnson class webcast mentioned in my previous post, Global Crisis Orientation, there was a discussion of the GM bailout.

I was also reading another blog that was touting the successful Chrysler bailout as a model for a GM bailout.

I don’t understand this talk about how the bail out of Chrysler was a tremendous success.

There is very little of Chrysler left. What little that there is will disappear shortly. If this is the success that we can expect from bailing out GM, then this is not a pretty picture. Maybe the slow death of GM rather than a rapid demise is the best we can hope for.

Maybe the discussion needs to change to one about how we will replace the big three with some other industries and let cars be made by the existing successful car companies like Toyota. What steps can the government take to ease the transition for the employees, retirees, and supply chain?

What will happen to the financial system when GM defaults on the trillion dollars of GM company debt being held by the financial system?  We need to prevent this financial disaster.

If there is to be a bailout, perhaps its only purpose should be to smooth the transition to the phasing out of some of these three auto companies. If others want to start up a new American auto company by purchasing some of the resources of the big three, then so be it.  If nobody wants to do this, then we ought to let them fade away.