Fredo tries explaining to Michael that Ola approached him because the negotiations weren't going well. Regardless of the attempt on Michael's life, when you're involved in a transaction like that, you have to present a united front to the other side. And it's not like Fredo wasn't severely chastised about publicly taking sides against the family before.

Killing him was probably extreme, but something had to be done. If Fredo was allowed to go into business for himself without consequence, what message does that send to the rest of the Corleone family?