Now they tell us

GM More Open to Bankruptcy

Top General Motors Corp. executives are more open to a speedy bankruptcy reorganization financed by the government, pushing aside earlier concern that such a move would scare away so many customers the company wouldn’t survive, said a person familiar with the matter.

While the company still wants to avoid bankruptcy, the new view represents a reversal from GM’s position late last year, when it sought a federal bailout. The change in thinking, combined with the disclosure Thursday that GM’s auditor has raised “substantial doubt” about the car maker’s ability to keep going, appears to move GM closer to the possibility it will file for reorganization.

Oh, I see. So all of that business about how customers would never buy cars from a bankrupt company, all of those nuclear winter scenarios of bankruptcy costing 10 gigajillion jobs, that was just … a version of the truth.

Well. If bankruptcy is not so unthinkable as all that, and if the purpose of giving lending GM (and Chrysler) all those billions was to avert bankruptcy, then how about we just go straight to bankruptcy, minus the billions of wasted public dollars? Because even with bankruptcy protection, there isn’t going to be any “speedy” resolution of this mess. GM is losing around $100 million a day — $9.6-billion in the last quarter — and you don’t turn around an ocean liner that size in a few months, or even quarters.

So the notion that Tony Clement was peddling the other day, that we could just flip them a few billion more (in addition to the billions already granted) and that would be the end of it — that if the auto makers came back for yet a third helping, “the answer would be no” — is pure fantasy. Indeed, the greater likelihood is that governments will plunge ever deeper into debt to prop up a company they know isn’t “viable,” simply because of all the billions of borrowed dollars they have already poured into it. If, after all, they had the stomach to force GM into bankruptcy at some point in the future — the implication of Clement’s claim — they would presumably be prepared to do so now. And since they aren’t now, why would they be any more likely to then?

Either GM/Chrysler have a long-term future — in which case, bankruptcy should allow them to work things out with their creditors, workers etc — or they don’t: in which case this really would be a case of throwing good money after bad. Either way, the time for governments to say no is now.