GM, Chrysler, and Uncle Sam Have Already Failed

By the time it "collapsed into the government's arms" on the morning of June 1, the bankruptcy filing by General Motors surprised no one. In retrospect, given our pathetic leadership, it's surprising how many thought that it, or Chrysler's filing the previous month, could have been avoided.

Now, amidst all the happy talk about how the two companies will succeed once they emerge from bankruptcy, there's even doubt about that. James Pethokoukis, blogging at Reuters, tells us that former Clinton Labor Secretary Robert Reich thinks that the GM bankruptcy may only be "slowing down the death process so communities and workers and the economy have more time to adjust to GM's demise." If that's true of GM, you can forget about a post-bankruptcy Chrysler having any legitimate viability except as a consumer of taxpayer cash.

Even the companies' emergence from bankruptcy is, as of this writing, far from certain. Having ridden roughshod over the first-lien rights of secured Chrysler creditors, the vast majority of whom were intimidated into settling for 29 cents on the dollar, the government finds itself still having to deal with a June 5 court hearing in federal appellate court, where recalcitrant Indiana pension funds could conceivably stop Chrysler's sale to Fiat. There is also a suit by terminated Chrysler dealers that appears to at least have some disruptive potential. A tight deal completion deadline could mean that court appeals by the losing sides in either case, if not promptly heard, would enable Fiat to walk away and completely scuttle the deal.

Thanks to the government's heavy-handed treatment of GM's unsecured creditors, that bankruptcy could face similar potential hurdles in the coming months.

But regardless of the bankruptcy-reemergence outcomes at these two former American icons, all of the key players involved -- the companies' senior managements, the United Auto Workers union, and the government -- have failed miserably, both in the run-up to the mid-December bailout and during the five and a half months that have since transpired.