Here is a look at the cost of the various restructuring plans GM has put before the Government:
Graphic Courtesy of the WSJ
While the non-bankruptcy restructuring plan looks attractive due to its lower price tag, it's important to remember that the $27 billion is the minimum cost, which means that the plan could easily cost more on top of not coming with any sort of success guarantee. Especially when at its core the plan is an attempt to fix GM within the context of the current roster of liabilities and legacy costs that are holding the company back.
I really don't see the point of giving GM $27 billion and hoping that they fix the company over the next 24 months, especially when the economy will continue to worsen for at least 1/2 of that time period. Not to mention the fact that it's all but guaranteed that the company will need even more money.
The Prepackaged and Cram-Down bankruptcy options make more sense because even though they have a higher baseline price tag, you could unlock the valuable parts of the company within a space of 2-3 months. While this would undoubtedly cause some short-term pain and loss of sales, both plans come with a much higher guarantee of GM being positioned to be efficient and profitable again.
As I've said in the past it really comes down to whether or not GM and the U.S. government want to partner up to truly save the company, vs. figuring out a way to preserve as much of the old GM and all of the things it subsidizes.
Disclosure: at the time of publishing the author didn't own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn't be viewed as financial or investment advice.