When it is all said and done, Chapter 7 would have been the better option for everybody except the union.
1) All assets would have been liqudated, paying back though nowhere in full, the bondholders and the taxpayers.
2) Ford, being the only U.S. car company left whole, would have been in a power position with the UAW and would get the wages and benefits reduced to what Honda, Nissan and Toyota pay U.S. factory workers.
I'm not certain, one way or the other, that Chapter 7 (for GM, not Chrysler) would have been as better. I'm not saying it is or isn't, just saying I'm not totally certain.
But I can tell you this. If GM had declared Chapter 7, you and I, would be on the hook for more than the $50Billion that GM has gotten. Retiree pension and health care funds don't just disappear automatically. It is guaranteed that the Feds would have taken them over and fully funded them on the Tax Payers dime. The original debt retiree health care was $35Billion. We, the taxpayers, would be put on the hook for at least a portion of that. Then there is the unemployment benefits for as many as 3 MILLION people from GM, Chrysler, their Suppliers, dealers, etc, etc, etc..
So what about Ford? Mulally stated before that if GM and Chrysler went away, there was a decent chance that Ford wouldn't survive because of all of the suppliers that would have disappeared. Since the beginning of this fiasco, Ford, Toyota, Nissan, and other manufacturers would go under. But now, 6 months later, there is a decent chance they'll be OK.
Who would be the real winners if GM had gone Chapter 7? Probably the Chinese. They could buy up GMs assets for pennies on the dollar. They would then move all that manufacturing to China and have an easy route for importing cars to the US. China would become a major player in the US car market almost overnight.
Oh, and you personally could lose your job. GM is still a major part of the US economy. The shockwaves from a Chap. 7 would be felt in many other industries outside of auto manufacturing. I bet my company (HP/EDS) would have to lay off 10s of thousands more people because GM is a major customer of ours, as is Chrysler, Nissan, and Ford. You might think we would be better off (and in long run you could be proven correct) but if it would be very very stupid to think that a Chap. 7 of GM and Chrysler would not affect you on a very personal level...