GMs Collapse May Cost $200 Billion?

Great, now we have systemic risk from a company that has nothing to due with the credit crisis and everything to do with being poorly run. Their income statement is an absolute joke. What kind of company has a Cost of Revenue that is $5 billion higher then the actual Revenue? That means it costs more to build the cars and trucks then they get from selling them. It is like paying $2.22 to make a lemonade and getting $2.00 for each cup. However the devastation that GMs bankruptcy would cause is scary as well.

The projected expense of $100 billion to $200 billion covers funds for existing programs, such as unemployment insurance, and new measures that would be needed to revive economic growth after millions of auto-related job losses.

Such a sum would be an eightfold increase over the $25 billion bailout package that will be debated in Congress next week to help prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC amid the industry's worst sales year since 1991.

Plus the US Government would be on the hook for GMs outrageous pension plan. The government would suddenly be forced to pay for an extra $11 billion dollars so that retired UAW members can get a pension.

One of the biggest fears in Washington is how a bankruptcy filing by one or all of the auto makers would affect the federal agency that insures the retirement savings of almost 44 million Americans. The Pension Benefit Guaranty Corp. ended 2007 with a $14 billion deficit, though that shortfall was expected to shrink to about $11 billion. Were GM to place its pension burden on PBGC, it would more than double the agency's current shortfall.

I think any GM bailout needs to come with strings attached like the removal of the CEO and upper management. The bailout must also force GM to renegotiate their labor contracts so that they can get that Cost of Revenue number down to something manageable.

Anything else would just keep the company going for another 3 quarters or so and if Revenue doesn't improve in that time (it might not due to a multi-quarter recession) they will simply ask for another $25 billion next year or they will go bankrupt then instead.