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He should have let the entire company close, as would have been done with the banks. Definately a harder pill to swallow and yes, it would hurt more in the short term. Long term it would have righted the system and let company's and banks know they are not too big to fail. Instead, we have an extended recession - with a possibility of a double dip - company's and banks owned by the Federal Government - bailed out with billions in taxpayer money.
What I'm questioning in this case is what the effects are of closing these dealerships pre-emptively. Was this for Chrysler and GM to keep more for the executives when they knew they'd be going through Chapter 11 - or - was the motive really protecting the company? Again, I go back to closing these dealerships add to the joblessness --- but since they were getting bailed out, why not keep most of these dealerships open and only close the one's that were in real trouble and as was identified - would have closed anyway?
Closing the dealerships in bankrupcty saved the company money. During bankrupcty a company can break contract without financial penalty. Had GM waited untill it exited bankruptcy it would cost GM a large amount of money to close them. As such it made financial sense to close them at that time as to ensure GM becomes a profitable enterprise in the future. At less cost to the government