If GM and Chrysler had filed Chapter 11 a year ago without government interference, their management would have negotiated with their unions, banks, and other creditors. Management would have had the right to reject all of the bad contracts (union, dealership, supplier, etc.). The damages from all those rejections would have ended up as claims against the bankruptcy estate in any event. The companies would have emerged from bankruptcy as leaner, more competitive entities under a confirmed reorganization plan.

The underfunded pension plans would have been taken over by PBGC at taxpayer expense.

Likely outcome: a leaner, more competitive company with private sector management. Instead, we have the U.S. government and Obama’s labor union allies in charge of the reorganized entity.