Debt can be good when used as leverage. As I understand it, the majority of debt of car companies is used to provide leases. So e.g. GM borrows money at X% in

Debt can be good when used as leverage. As I understand it, the majority of debt of car companies is used to provide leases. So e.g. GM borrows money at X% interest rate and gives credit to customers at X+Y%. Y% is their profit. So the bigger the debt, the more additional profit they make. This is also a ticking bomb because leverage generates more profit when times are good but increase losses when times are bad. That Y% finances the risk that a customer will stop paying. It also comes from GM being able to re-sell the car after the lease for more that it's worth ($PriceOfCar - $TotalLeasePayments). When bad times come, like in 2008, those companies are hit with double whammy: people have less money, so more people abandon the lease. And also buy less cars so car prices drop so re-sell value drops. So suddenly GM has losses and cannot afford the debt payments and that's how they go bankrupt.