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Published: Wednesday, 5/27/2009

Softening the landing

PRESIDENT Obama has been praised and criticized for many things in his first tumultuous months in office. But one of his greatest accomplishments so far may be an achievement so subtle it was barely noticed. Through a combination of loans, speeches, and psychological nudging, he has prepared the public and the automotive world for the bankruptcy filing of Chrysler last month and, in all likelihood, General Motors sometime in the next few days.

If GM does, as expected, seek Chapter 11 protection, it will be a sobering event underscoring the plight of what was once the richest corporation in the world, and the crisis in an industry that was the very symbol of American manufacturing might.

But today, it is unlikely that it will set off panic on Wall Street, despair on the part of consumers, and a chain reaction affecting suppliers. That's very likely what would have happened if these giant automakers had declared bankruptcy in December or January, in the aftermath of last fall's frightening Wall Street tumble.

The President deserves credit for bringing the public and the auto companies themselves around to see that bankruptcy didn't have to mean the end of the world. To be fair, his predecessor, George W. Bush, also deserves praise for extending $17.4 billion in loans to the automakers last December, after a bitterly partisan Congress refused to do so. Had the car companies been forced to declare bankruptcy then, it likely would have set off a chain reaction that would have made it impossible for them to sell cars, bankrupted major suppliers, and threatened to send Ford and Toyota over the cliff as well.

Since then, the Obama Administration has shored up both suppliers and GMAC, the financing arm, with well-placed loans; reassured consumers that their warranties would be protected, and moved to get the companies out of bankruptcy quickly.

None of this is to imply that a GM bankruptcy, if it comes, will be a good thing. More jobs will be lost, and lives disrupted. But the economy is unlikely to go into free fall, and the company itself is likely to emerge and survive.

President Obama knows you don't get awards for preventing a bad thing from becoming far worse. But he does deserve to have us say, "Thank you, Mr. President."



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