The human cost of GM's failure

There was an interesting discussion/argument about whether or not to bail out GM on CNBC this morning. There were a number of different elements to the discussion: Cerberus Capital, the company that owns Chrysler and Chrysler Finance, as well as a majority interest in GMAC, is trying to position itself to get financial bailout money from the U.S. Treasury. GM is trying to get additional loans from the U.S. Government in order to close its acquisition of Chrysler. But hovering over both these issues was the bigger question: Should GM be allowed to fail? After all, it's been mismanaged for decades. We live in a capitalistic, free market society where companies have no right to survival, and no company should be "too big to fail."

The only panelist who seemed to have any interest in the impact of such a decision on the lives of people was Phil LeBeau, CNBC's beat reporter covering the auto and airline industries. LeBeau repeatedly stated that GM going under would be tantamount to exploding a nuclear bomb in the U.S. Midwest. He pointed out that not only would all of GM's workers lose their jobs, but the entire infrastructure of Tier 3, 4 and 5 parts suppliers that are largely or completely dependent on GM or its bigger suppliers would also go under, and with them would go their employees' jobs. Many of the retailers who supply these workers with goods and services would soon follow, along with their jobs. The cities and towns that depend on property, sales and income taxes would be stressed to the limit as their tax bases dry up while demand for their services increases. (If anyone would like to get a foretaste of what would happen, I invite them to visit the steel towns of Western Pennsylvania, where I grew up. The model of progressive economic collapse started in the early 1980s as steel mill after steel mill closed. Today, over 20 years after the steel industry failed, very little has improved.)

I was shocked that none of the other panelists even seemed to understand LeBeau's argument--it's not just GM, it's the entire economy of large portions of the Midwest, and peoples' lives, that are at stake. Perhaps it's time for CNBC to have fewer reporters in New York, and more reporters in the field, where the real economy lives.