Proposal for GM

So I am against a bailout. What's the solution to the problem?

Those supporting a bailout are right about one thing: GM is too big to fail.

The bailout is wrong because it is not a mechanism for keeping GM from failing, only for putting off the failure and dragging out the pain of failure.

GM is a bad company run by incompetent management and burdened by absurd union contracts. It needs to shed its management, rip up its union contracts, and be broken into smaller pieces to succeed.

Bankruptcy won't make that happen. This situation is not the kind of situation in which a company enters bankruptcy, reorganizes, and comes out leaner. This situation is a liquidation event. Either way, good companies that have been serving GM will be put out of business because they won't see a dime of money that GM honestly owes them.

A bailout, however, has two equally bad paths:

1. It will perpetuate bad management practices and leave in place labor contracts that make no market sense. 
2. The government will put strings on the bailout. You know what's worse than bad businesses people managing a company? Government managing a company. 

There is an alternative. A bailout of the workers and vendors that have done nothing wrong while throwing out the management and bad corporate structure that made this situation possible. Here's how we do this:

1. Let GM enter Chapter 11 or Chapter 7. 
2. Any vendor or other creditor who is validly owed money at the time of bankruptcy will receive a government backed loan for all amounts owed by GM to them.
3. Any GM worker laid off will receive 6 months severance from the government.
4. Any GM worker without a college education or who has worked for GM more than 10 years will receive government paid education to re-skill themselves.

As a result, vendors and workers will receive reasonable protections against the bankruptcy, but the company itself will be broken up and its assets restructured in accordance with the market. The market-based restructuring will enable new companies to emerge than can make the US automative industry competitive again.