There's a secret reason why bankruptcy is not attractive. Many people think that the prime benefit of bankruptcy is that the debtor can get out of its contracts, such as its union contract. That is ordinarily a benefit, but not in the auto industry. Over the past few years, the automakers have imposed upon their suppliers some very one-sided deals. The cost of developing new parts used to be borne by the Big Three. Now the manufacturers force suppliers to bear most of those costs. The supplier pays those costs up front, then they tack on an extra amount for each part manufactured to recoup those costs. When the industry was selling more than ten million cars, suppliers complained, but they recouped their costs eventually. Now that cars aren't selling, these costs are still being borne by the suppliers, and it is hurting them. If a Big Three manufacturer goes bankrupt, these contracts can also be voided. The manufacturer will have to re-assume these up-front costs, which puts them in an even worse cash-flow situation than they face now and makes it even more unlikely they can emerge from bankruptcy in the short term.

Some suppliers have been going belly-up themselves, in part because of these contracts. When that happens, the Big Three generally don't have a backup supplier who is willing to incur the up-front costs. The Big Three then have to bear those costs, try to get the old tooling (which they don't own because they forced the supplier to bear this cost, so they often have to make new tooling), and then hire a company that doesn't play the Big Three's cost-shifting game. The Big Three end up paying more for those parts, as well as incurring many of the tooling costs up front. There is one Canadian company in particular that has made a fortune by the being the "go-to guy" when suppliers can't survive.

Bankruptcy will also likely shift pensions into the federal guaranty plan that reportedly does not have enough from premiums collected to actually bear the expense. Taxpayer money will have to be used to prop up that office.

I weigh the price of a loan (which carries a benefit of interest and a risk of nonpayment) against the costs of all the alternatives. All those people who say "let them suffer" need to remember that we will all pay a price no matter which route is taken. Choose wisely!