TW: Tuesday is meant to be an inflection point for GM and Chrysler, they are to submit plans justifying more subsidies from us or cut bait. Not surprisingly the leaks are flying this weekend in particular with GM "pondering" bankruptcy. Also the UAW negotiations had one of their periodic breakdowns last night.
At this point, given the depth of the hole they are in (regardless of the reasons and the reasons are vast and not related purely to incompetence) and the state of our economy; I am now in the bankruptcy as best course camp. The job losses are going to be massive whether they go Chapter 11 or not. Worldwide overcapacity in autos is extremely high and will have to be reduced.
Chapter 11 re-organization probably provides the best mechanism by which to force bondholders (equity holders are done and anyone owning US auto stock other than as a trade is deserving of being wiped out), the unions including retirees (although I suspect we the taxpayers will end up "owning" those pension funds sooner rather than later), and others to make the painful choices and reductions necessary if GM and Chrysler have any future. I do not buy the notion that folks will stop buying GM cars if they go into Chapter 11, anyone who is not concerned about GM is living in lala land so they are already taking risk if they buy GM. A solid re-org plan might actually do wonders for their reputation.
I say this given what I know from superficially following the matter and trying to be cold-blooded about it. There is of course the possibility that GM could be a Lehman (i.e. a firm that if it goes down will bring the rest of the country along with it). Understand actual companies and individuals own the $100 billion of GM/Chrysler debt, if they start taking bigger haircuts there will be repercussions. If GM/Chrysler force even deeper supplier cuts, there will be repercussions etc.
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