A Bankruptcy to Save GM
November 19, 2008
by Joshua Rauh and Luigi Zingales
Not long ago, Alitalia was one of the largest airlines in the world. Today it is a shadow of its former self, having burned massive amounts of money. The culprit was the Italian government, which continued providing subsidized financing to the money-losing airline, delaying the necessary restructuring. It was a death sentence for the very company it wanted to save. Postponing the day of reckoning weakened Alitalia’s competitive position and permanently destroyed its market share. General Motors is tumbling down the same path.