When General Motors files for bankruptcy early Monday morning, we will witness "the humbling of an American icon," proclaims the Wall Street Journal in the lead sentence of its lead story on Sunday night.
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.
It has been the hallmark of the young Obama presidency that there are few good options for the administration to pursue in many arenas, whether in Afghanistan or Detroit -- there are only less bad alternatives. The General Motors bankruptcy is a prime example. The ultimate selling point for the managed bankruptcy is that it might not be as bad for the overall health of the economy to try to mitigate the damage that a messy liquidation could wreak.
Viewed thus, maybe the most amazing thing is that having chosen their perilous course, the Obama administration has moved with surprising dispatch.
From the Journal:
The Obama administration, for its part, has navigated the GM rescue so far with notable speed, clearing away many of the biggest obstacles in just months with less drama than many expected. In six to 18 months, GM could be a publicly traded company again, administration officials said.
For example: Ever since the full extent of General Motors' plight became obvious last fall, critics have declared that the government would never be able to get the automaker's vast number of bondholders to agree on significant "haircuts" that would take chunks out of what they felt they were owed. And yet, on the weekend before the administration's June 1 deadline, more than 50 percent consented to a deal that gives them about 10 cents on the dollar, plus warrants to buy stock later. Unlike in out-of-court restructurings, where the vast majority of the bondholders have to agree before any deal can be consummated, in bankruptcy court, a simple majority is all that is necessary to move forward (although other parties can, and no doubt will, litigate their hearts out for years to come).
So, we don't know whether G.M. will ever be healthy again, and we don't know whether the U.S. is sliding down the slippery slope of state intervention in private industry. But we do know this: When the Obama administration sets a deadline, it isn't messing around.