CNN had an alarming graphic on tonight. There are six states where over 100,000 people are employed by auto companies, suppliers and dealers. Another forty states employ more than 10,000 in directly auto-related jobs. The size of the auto industry makes the list of bankrupt companies listed by SteveZ look like peanuts.

Everyone can say all they wish about how bankruptcy will work best. I hope that they speak from first-hand experience in working thru a bankruptcy, although it doesn't appear that they have. As a retired banker I have. I know first-hand how bankruptcy works and why sometimes it doesn't.

Bankruptcy can work, if the taxpayers continue to provide debtor-in-possession loans--some of which will never be repaid-- and the stakeholders make a sincere effort to reach agreement on a Plan of Reorganization. The UAW and the bondholders have not negotiated in good faith in the months until now, so there is little reason to be hopeful that they'll suddenly become cooperative after bankruptcy is filed. The bankruptcy judge will not inject himself into the negotiations and create his own plan--that's a function that by law is the responsibility of the creditors operating within a creditors committee.

Examples have been provided of bankruptcies that have worked. How about Delphi Corporation? Delphi was formed from various component manufacturing businesses and spun off from GM in 1999. By 2005, Delphi found that it had to declare bankruptcy. The objectives of their reorganization within bankruptcy is exactly the same as GM's would be should they have to file--but on a much smaller scale. Delphi has been operating under the protection of the bankruptcy court ever since, almost four years, with no progress being made by the Creditors Committee in negotiating a Plan of Reorganization. The parties to the Delphi bankruptcy are the same parties that would be involved in a GM bankruptcy--the UAW, bondholders, materials suppliers, etc. If GM were to file and the parties performed the same way, the federal government could be pouring taxpayer's money in the form of D-I-P loans down that rathole for a long, long time while the members of the Creditors Committee sat on their hands, just as they're doing with Delphi.

The government doesn't want to own and run GM, but given the choice of a couple of million people being thrown onto the unemployment roles all at one time might require the government to own and run GM for awhile--maybe a long while. The alternative would be sudden chaos beyond what we can imagine. Frankly, that's probably the reason that the UAW and the bondholders are being so uncooperative. They know the chaos that would result from a failed reorganization and liquidation of an industry of this size. They appear to be betting that they'll win the "chicken" bet with the government.

If the industry does fail, with all the intended as well as unintended consequences, there will be plenty of blame to go around. But it will clearly start with the management, the UAW, and the banks and investment banks that provided financing to the car companies. The government, if it had much of a role over the years, clearly only played a tertiary role in the failure of this industry.

But before anyone here provides "expert" advice on how bankruptcy is the best alternative, I would hope that those that read those postings and form opinions based on them think about what is actually happening in this situation, how and why the parties are acting as they are, and what the real consequences might be if bankruptcy doesn't work.