I agree that Chapter 11 is the only reasonable path for GM. It is certainly NOT reasonable to think the the taxpayers should continue to fund their negative cash flow until such time as sales volume picks up to thier inflated break-even-point.

But I strongly believe that a Chapter 11 will quickly turn to a Chapter 7--liquidation. I see no "give" whatsoever from the UAW or the senior debt holders. The dealers aren't far behind--they all agree that there should be fewer dealers, but it should be the guy down the street that shutters the windows, not them. The senior debt holders will take a lesser "haircut" in liquidation than they would in a Chapter 11 reorganization, so they're not at all motivated to negotiate in good faith on a creditor's committee. The UAW seems perfectly willing to play chicken until the bus is already airborne off the cliff. They still beleive that the country "owes them" for the wonderful job they did converting the plants from making cars to tanks and planes in WWII. Who remembers that besides them?

Someone will buy the brand names and maybe a factory or two out of the liquidation, so in time there may still be cars called "Chevrolet" or "Buick" or "Chrysler" or "Dodge" being made somewhere (probably overseas) by some non-union workers. The cities and towns where all those domestic auto plants are located--they will all be in a heap of trouble trying to maintain their schools, city maintenance, public safety, any service or employee that was getting paid from the tax receipts paid by the auto companies or the workers. Lots and lots more "smokestack towns" which will suddenly have no smoke coming from the stacks.

The unintended consequence is that the failure of GM will certainly cause the failure of both Chrysler and Ford, as well. Chrysler may actually run out of cash before GM. But Ford looks like it could make a go of it--but not without the 3-4 key suppliers that will be shuttered as the result of the GM/Chrysler bankruptcies. Even in the best of circumstances it would be months before replacement suppliers could be lined up by Ford. But the fact that much of the Ford-owned tooling located in supplier's plants would have to get the blessing of a bankruptcy court in order for it to be moved would add months to the process of Ford starting up again. While Ford is in the best shape of the American car makers, they certainly don't have enough cash to last out the time it would take to re-establish the supply chain. And that avoids the discussion that the replacement suppliers themselves may be in the process of bankruptcy or liquidation.

Then there's the dealers, of course. If all three American companies go belly up, how long do you think it will take for every domestic car dealer in America to turn out the lights? I'd give it a matter of weeks, not even months. If the banks won't lend to creditworthy borrowers, what do you think the chances are that they'd lend to a GM, Chrysler or Ford dealer? Floor-planning loans for new car inventory? What are those cars worth? Regular old working capital loans? Not a chance for a dealer who has no source of product to sell. Warranties on U.S.-made cars? Hah! If a few dealers actually survived, where would they get the parts?

Like I said, bankruptcy seems to be the only alternative for these companies. But the unintended consequences will be a severe blow to our economy. I'd go so far as to say the worst so far.

Who to blame? It starts with everyone who goes home with a paycheck from GM, Chrysler or Ford every Friday--both management as well as the UAW. I don't think one needs to spend a lot of time trying to add to that list--just the management and union are enough. They've run the bus off the cliff. All we're awaiting now is the sound of the big crash.