According to an article in the Star-Telegram, General Motors' CEO Rick Wagoner warned the Obama Administration that liquidation would be imminent if GM was forced into a Chapter 11 bankruptcy.
The article said:
Wagoner said a 30- or 60-day prepackaged bankruptcy might not work, according to an audio recording obtained by The Associated Press. "If it doesn't, you'd need in the end a long period of bankruptcy, which I believe would result in liquidation of the company," he said, adding that GM research continues to show that customers would shy away from buying vehicles from companies in bankruptcy.
The truth of the matter is that GM is struggling to stay alive because customers are already shying away from buying any new vehicles from any carmakers whether they are in Chapter 11 bankruptcy or not. But if GM was forced into a bankruptcy and a subsequent liquidation as Wagoner fears it could have devastating affects on the American economy. A GM liquidation in bankruptcy would mean a loss of thousands of jobs held directly at GM and other companies dependent on the struggling automaker. Those jobs would not be easily replaced in today's current environment. We would also see an increase in the number of foreclosures and personal bankruptcies in regions dependent on the carmaker who has already received $17.4 billion in government loans.