Companies that go through a Chapter 11 backruptcy reorganization tend to shed jobs, close factories, and discontinue product lines. Airlines do this on a periodic basis and it doesn’t seem to upset anyone. The managers of the Detroit automakers claim that somehow a Chapter 11 bankruptcy reorganization by them would be disastrous for the U.S. We wouldn’t be able to survive if they were to shed jobs, close factories, and discontinue unprofitable product lines. We need to give them billions of dollars of taxpayer funds.
What do they propose to do if they get these billions of dollars? Shed jobs, close factories, and discontinue product lines.
Actually there is one difference between bailout and Chapter 11: namely, whether automakers’ creditors will be paid or not. So the question boils down to this: who are these creditors and why are they so important?