...but in The Nation section of Sunday's NYT, there is an article describing how what happened to the U.S. steel industry might actually work to fix our auto industry. The idea presented is very much aong the lines of what I think should be done.

If you recall what happened to steel, there was a government bailout that didn't work and all the big steel companies declared bankruptcy. The union contracts were voided, the pension obligations were turned over to the Pension Guaranty Corporation for the government to make good on, healthcare benefits for the steel retirees were cancelled, and the companies were liquidated. Then there was a guy by the name of Wilbur Ross who bought up what he wanted of the big steel assets and started a streamlined and more efficient steel company based on mini-mills which he called International Steel. He bought the big steel assets for a song and after getting the new company going, he sold the newly formed company to the Indian entrepreneur Lakshmi Mittal, who owns it today. (The U.S. steel industry is foreign-owned, in case you missed that point.)

But in the current situation, Mr. Ross is not in favor of the auto companies declaring bankruptcy. Mr. Ross doesn’t dispute that the auto companies are as bloated as the steel companies were, and certainly doesn’t think they should get a blank check. But he thinks the consequences of what he calls free-fall bankruptcies — ones without any government role — would be disastrous. GM would drag hundreds of suppliers down with it, and they would all have trouble getting back in business.

Furthermore, it’s a tremendously problematic time. The final collapse of the steel industry came when the economy was healthy and could absorb the blow. The current economy is the weakest in decades.

“Bankruptcy will be a total mess, and may not produce anything of value at the end of it,” Mr. Ross said. Instead, he would like to see a 90-day government loan to keep GM afloat on the condition that all the stakeholders — including employees, management, bond-holders — agree on a restructuring. The government would be there essentially to crack heads and make sure everyone made concessions.

This, however, would give the government ultimate responsibility for the death of G.M., should that come to pass. “The government would have to have the fortitude to say, ‘We’re not going to keep pumping in money,’ and mean it,” Mr. Ross said.

Would government regulators have such fortitude? Mr. Ross was uncertain but said if they didn’t, “they should hang their heads in shame.”
----------------------------------------------
Ross's idea is more along the lines of what I was thinking. If you want to read the whole article it's at http://www.nytimes.com/2008/11/23/we...l&st=cse&scp=2