G&L wasn't profitable because it was all word of mouth, yes the instruments were great, leagues better than Fender IMHO, but they didn't endorse artists and get their name out there. The Layman knows Fender, but they Don't know G&L. Exposure sells, even if the product is woafully mediocre.
Fender could have used the staff, building and tooling for their own instruments or Stuck the Fender Logo on G&L instruments, it would have been profitable in the long run.
If it was any other company I wouldn't blame them for only wanting a name, however Fender lives on Leo Fender's contribution to their company, its morally grey to let Leo's final contribution to the world die with the factory they could have saved.
So that's my reasoning.