Bankruptcy or Bailout for Automakers?

Bankruptcy Offers Chance to Restructure

Ingrassia favors a third option somewhere between bankruptcy and bailout, something akin to a U.S. receivership, like the Air Transportation Stabilization board that kept some U.S. airlines in business after Sept. 11.

"The government made money on the warrants it got in return for its assistance, and the airline industry was able to reorganize," said Ingrassia.

Related

Bailout: Critics Question Where Money Goes

$75B?!? See the Deal Detroit Is Driving At

Bailout Bill Basics From TARP to Tax Breaks

But the multibillion-dollar question remains: will consumers plunk down $25,000 to $50,000 for cars built by a bankrupt company when they have so many other choices?

Opponents of a bailout argue that Americans continued to fly through multiple airline bankruptcies. And while a bankrupt automaker may lead to more failures and job losses among businesses that depend on it, other companies with U.S. operations, including Toyota and Honda, might pick up the slack.

A bailout, on the other hand, could mean billions of dollars in taxpayer money that companies could pour back into failed models for the same mediocre results.

"Basically, what you'd be doing is putting the money in a failed business model, frankly," Ingrassia said. "These companies did not run into trouble just because of the mortgage meltdown and the financial crisis. They really started losing tens of billions of dollars as early as 2005."

Bankruptcy supporters say that a GM that survives Chapter 11 may emerge as a leaner, more efficient company. "The promise of a GM down the road that can stand on its own feet, support dealers, support workers and build cars that people want to buy," said Levine.

Washington confronts a painful choice: a bailout that risks wasting taxpayer money, or a bankruptcy that offers only the hope of a fresh start, but no guarantee.