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With the rejection of the automobile industry’s recent restructuring plans, attention is now focusing on some sort of managed bankruptcy before the end of June. GM’s new CEO seems willing to entertain the idea and is on record as saying that the company cannot move forward in the midst of a recession without a balance sheet that has been purged of debt and union contract obligations. Current discussions seem to involve splitting GM into a potentially profitable piece that could emerge quickly from bankruptcy while the rest is liquidated by the courts.
GM currently has 60 days of government support to work out its problems, while Chrysler is supposed to achieve some sort of merger with Fiat by the end of April or face liquidation. There are wide ranging implications for the US economy, but with industry sales stuck well below the level of profitability there seems to be no other choice.