...and a smaller, less shiny but possibly more sensible Phoenix rises from the ashes.

"On Monday June 1st, putting an end to weeks of expectation, General Motors filed for Chapter 11 bankruptcy protection. The idea is that the 100-year-old carmaker will be stripped of debts, other obligations and unsaveable parts and will then emerge from the bankruptcy court ready to perform like a sleek racer. The risk, however, is that it instead emerges as an old crock with a dodgy respray.
Bankrutpcy [sic] will certainly ensure the emergence of a smaller firm. The car company is being remade to cope with operating in a North American market with sales of 10m vehicles a year, roughly the number that will find buyers in 2009. GM might expect to get a little over a fifth of that market. To get into shape, more than 12 of its American plants will close and four brands—Pontiac, Saturn, Hummer and Saab—will be sold out of bankruptcy or will disappear for good. Hummer, apparently, already has a buyer. A significant proportion of GM’s dealers will go too. The end result will be over 21,000 GM workers out of a job."

Economist: Bankruptcy, at last, June 1, 2009

The Planet Money Podcast mentioned the argument that there are simply too many cars (about 1/4th too many) produced. The natural course of the market would be: when less people buy cars, less are produced to keep up the prices, also it doesn't really make sense. The downside: thousands of jobs at stake, and in the case of the car industry, at least in Germany and the US, jobs in specific regions of the country that are otherwise lacking business to employ the people there. GM disappearing would have meant an economic depression, not just a recession, for the "Rust Belt". On the other hand, intervention doesn't solve the underlying problem. Finding short-time solutions doesn't answer the real question: how can all these people be provided with jobs that will last longer than this short-term rescue operation?

NY Times: G.M.’s Chief Promises Full Details of Restructuring, June 3, 2009
NY Times: In Overhaul, G.M. May Look to Its Far-Flung Arms, June 3, 2009
Slate: Which Side Are You On, June, 2, 2009
Slate: A New Chapter, June 1, 2009
Wall Street Journal: New Era in Autos as GM Set for Bankruptcy, June 1, 2009
NY Times: G.M. to Seek Bankruptcy and a New Start, May 31, 2009