Aol reported Friday that, following a major turnaround since its government bailout four years ago, Chrysler planned to reward its workers with a share of profits. "There can be no more doubt that our comeback is real," Chrysler CEO and Chairman Sergio Marchionne said in an email to workers, adding that the "credit for our turnaround is yours." The automaker’s turnaround included a $1.7 billion profit, up from $183 million in 2011.

According to Chrysler's current contract with the United Auto Workers, eligible union members should expect to receive a check of about $2,250. This is not the first time Marchionne has acted as an untypical CEO. In 2010 and 2011, following the bailout, he turned down both a salary and a bonus for two years in a row.

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Full disclosure: as a member of the President’s economics team I strongly advocated for the rescue, as per both my principal (the Vice-President) and the view held by myself and others that the employment costs would be particularly steep in communities that comprised the relevant supply chains.  When you think about auto jobs, don’t just think about the factory at the end of the line where they assemble the cars and trucks.  Think about all the small and medium size manufacturers that make those parts.

That’s where many of the new jobs in Ohio are coming from and it’s an important piece of evidence for the bailout’s success.  Which makes it catnip for the Romney swiftboaters.

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In a radio ad running in Ohio, the Romney campaign leveled this attack at President Obama: "Barack Obama says he saved the auto industry. But for who? Ohio or China? Under President Obama, GM cut 15,000 American jobs, but they are planning to double the number of cars built in China, which means 15,000 more jobs for China. And now comes word that Chrysler is planning to build cars in, you guessed it, China."

Here's GM's rebuttal: "We've clearly entered some parallel universe during these last few days," GM spokesman Greg Martin said. "No amount of campaign politics at its cynical worst will diminish our record of creating jobs in the U.S. and repatriating profits back to this country."

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Undissuaded by the facts, media derision, or the vociferous denials of Chrysler's CEO, the Romney campaign is continuing to run new advertisements in Ohio claiming that Obama is responsible for a supposed Chrysler plan to outsource Jeep production to China at the cost of U.S. jobs. Talk about chutzpah: Romney's campaign is attempting to turn its greatest Rust Belt weakness -- "Let Detroit Go Bankrupt" -- into an electoral advantage.

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Look, share prices go up and down with lots of things, not least of which is the weak economy both here and especially in Europe where GM’s market share is 8% (it’s about 17% in North America).  The bailouts have nothing to do with that, and if you don’t believe me, look at the chart below showing the percent decline in GM’s stock price compared to that of Ford, who didn’t take government help (GMs in red, Ford’s in blue).

As I stress here, absent the bailouts and given credit market conditions at the time, bankruptcy at GM and Chrysler were virtually certain, as no private investors would have stepped up to rescue the companies from liquidating their assets.

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The numbers are hard to argue with: After the major automakers released their January sales figures, Autodata Corp. estimated cars raced out of lots at an annualized sales rate of 14.18 million vehicles for 2012. That's the best month of sales -- excluding August 2009's Cash-for-Clunkers -- since April 2008. GDP forecasters are likely rejiggering their first-quarter estimates even now.

Among domestic auto manufacturers Chrysler led the way, with sales surging 44 percent from a year ago. GM dipped 6 percent -- but that was actually less than analysts expected, since GM's numbers a year ago were boosted by big discounts and other incentives. Ford's sales rose 7 percent.

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Chrysler said it is recalling 288,968 Jeep Wranglers from the 2006 through 2010 model years due to a potential brake fluid leak.

It also is recalling 284,831 Dodge Grand Caravan and Chrysler Town & Country minivans from the 2008 and 2009 model years because a wiring problem can cause a fire inside the sliding doors.

Another 76,430 Wranglers and 34,143 minivans are being recalled in Canada, Mexico and other international markets, Chrysler said.

Neither problem has caused any crashes or injuries, Chrysler Group LLC said.

It was the second notable recall in the past week for Chrysler. The company recalled nearly 35,000 Dodge Calibers and a limited number of Jeep Compasses last week to fix a potential problem with sticky gas pedals, the same issue that has afflicted millions of Toyotas.

In the latest recall, the front inner fender liners on the Jeeps can rub against the brake fluid tubes and cause a leak. The National Highway Traffic Safety Administration said the leak could lead to a partial brake loss.

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The Court held:

Extraordinary conditions, such as an economic crisis, may call for extraordinary remedies, but they cannot create or enlarge constitutional power.

In 1952, in the case of Youngstown Sheet & Tube Co. v. Sawyer, the Supreme Court ruled that President Harry Truman's attempt to avert a nationwide steelworker strike during the Korean War by ordering the Secretary of Commerce to seize steel mills was unconstitutional.

The Court held:

Seizure and governmental operation of these going businesses were bound to result in many present and future damages of such nature as to be difficult, if not incapable, of measurement.

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Excerpts:

The applications for stay presented to JUSTICE GINSBURG and by her referred to the Court are denied....

"A stay is not a matter of right, even if irreparable injury might otherwise result." It is instead an exercise of judicial discretion and the "party requesting a stay bears the burden of showing that the circumstances justify an exercise of that discretion." The applicants have not carried that burden.

So never mind all that hyperventilating someone engaged in yesterday about the potential consequences for remaking bankruptcy law and a possible showdown between the Supreme Court and President Obama over the limits of government intervention in the economy.

Not this time, anyway. Next up, General Motors!

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This is a high-stakes game. Chrysler and the U.S. government have been arguing that any delay risks blowing apart the deal and forcing the immediate liquidation for Chrysler. But the pension funds contend that the reorganization illegally subordinates the rights of secured creditors to Chrysler's workers, and that the U.S. government illegally bailed out the car companies with TARP funds specifically designated for the financial industry.

According to the Wall Street Journal, "The high court, in a brief order, said it will extend a temporary stay put in place by an appeals court until it has the chance to receive and review routine appeals from groups opposed to the sale."

SCOTUSblog, which has become a must-read news source blog for Supreme Court watchers, says that "the action has almost no legal significance," that Ginsburg's order

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It won't be easy and there's no guarantee of success, but maybe it's time to give the White House a little bit of the benefit of the doubt. The rhetorical high moment of Obama's speech came when he noted, with respect to Chrysler, that "many experts said a quick surgical bankruptcy was impossible."

"They were wrong," said the president.

(On the same day that GM filed for bankruptcy, Chrysler's bankruptcy judge approved the company's restructuring plan, just 31 days after Chrysler's initial Chapter 11 filing.)

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The bottom line for GM comes about three-quarters of the way through the 24-page filing:

The following financial data is the latest available information and refers to the debtor's condition on March 31, 2009.

a. Total assets on a consolidated basis: $82,290,000,000

b. Total debts on a consolidated basis: $172,810,000,000

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And yet -- the denouement is not quite as humbling as the only other realistic alternative: a catastrophic liquidation, sure to deliver another debilitating blow to an already tottering economy. It's a choice no automaker, or American president, could possibly welcome -- but it's the choice President Obama and General Motors faced.

The New York Times calls the managed bankruptcy, in which the United States government will end up a 60 percent owner of the new General Motors, a "risky bet." That's an understatement. Although General Motors will unburden itself of billions of dollars of debt and other liabilities, there is no guarantee that the automaker will emerge better able to compete with the likes of Toyota -- or even Ford. There is no guarantee taxpayers will ever see their money back. There's no guarantee that this bold new experiment in American capitalism won't turn out to be a complete disaster.

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One could argue that both sides would stand to be in pretty bad shape if the U.S. government wasn't around to pump billions and billions of dollars into the enterprise to keep it a going concern, so keeping score on who is doing better out of the deal is beside the point. But I couldn't help recalling GM President Charlie Wilson's testimony during his Senate confirmation hearing for the position of Secretary of Defense in 1953, to the effect that he could not conceive of a situation where, as Secretary, he could make a decision that would hurt GM's interests "because for years I thought what was good for the country was good for General Motors and vice versa."

If the bankruptcy filing goes as planned, the U.S. Treasury will own 70 percent of the new GM, meaning, to all intents and purposes, that "the country" will be General Motors. So I guess now we have to ask: "Is what's good for the country good for GM bondholders or vice versa?"

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A favorable (for the government) ruling doesn't necessarily mean a permanently done deal. Opponents can, and probably will, appeal the decision. But so far as we can tell now, the White House has been playing a winning hand with Chrysler -- President Obama promised a swift bankruptcy procedure and he seems to be getting one.

But Chrysler is small fry compared to General Motors. Despite speculation here and elsewhere that Obama's smackdown of the Chrysler hedge fund bondholders was intended to send a stern message to G.M.'s bondholders in order to get them to play ball with an out-of-court restructuring, it now appears that the government and G.M. have accepted that bankruptcy is the only workable option. With Chrysler, the government engaged in some give-and-take haggling right up to the government-imposed deadline. But with G.M. the government's stance seems to have been more inflexible. No one expected G.M.'s thousands of bondholders to agree to the government's original offer, and, unsurprisingly, they didn't.

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That is the gist of a fascinating Bloomberg News article published today, "Fund Managers Burned by Obama Now Say They Are Wary."

Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLC's bankruptcy....

Pacific Investment Management Co., Barclays Capital and Fridson Investment Advisors have joined Schultze Asset Management LLC in saying lenders may be unwilling to back unionized companies with underfunded pension and medical obligations, such as airlines and auto-industry suppliers, because Chrysler's creditors failed to block Obama's move. The reluctance may put additional pressure on borrowers seeking capital in the worst financial crisis since the Great Depression...

"People are starting to think 'This is a very activist administration, even more than we counted on,'" said Martin Fridson, CEO of money manager Fridson Investment Advisors in New York. "If it comes down to the interest of creditors or labor unions, the administration is going to override what you thought you could do."

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Bloomberg is reporting that G.M. is "is sending termination notices today to 1,100 U.S. dealers with about $2.5 billion in unsold vehicles." In separate news, the automaker is supposedly near a deal with the UAW that would cut its labor costs and health benefit obligations, and result in another 20,000 layoffs.

Both moves are just a prelude to the bankruptcy filing that seems increasingly inevitable. According to the Journal's analysis, the goal is to get major deals in place before going before the bankruptcy judge, in the hopes of achieving an accelerated proceeding.

The big sticking point there, however, will be the unsecured bondholders, who are already screeching that the the government is running roughshod over their legal rights. To which the Treasury appears to be responding: So what?

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The decision to dissolve the unofficial group was made in connection with the decision by OppenheimerFunds and Stairway Capital Management to withdraw, said Glenn M. Kurtz, a White & Case partner representing the bloc. With those two firms pulling out, the so-called Committee of Non-TARP Lenders would hold below 5 percent of Chrysler's $6.9 billion in secured debt. That would almost certainly eliminate the group's standing in federal bankruptcy court.

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From the Financial Times:

A U.S. bankruptcy judge has rejected an attempt by dissident Chrysler creditors to derail the sale of the ailing carmaker's viable assets to a group of new shareholders, including Italy's Fiat.

In a ruling at 11pm EDT, Judge Arthur Gonzalez approved the process for the sale, which requires final court approval by May 27, as "appropriate and necessary."

He overruled objections from a group of creditors who oppose the sale and who argued that the guidelines set out restrict competing bids.

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