Automotive News has an interesting article citing auto industry observers who think that President Obama is bluffing with his threats to put GM and Chrysler into bankruptcy if they can’t meet more stringent demands for concessions from their employees and debtholders.
 

Some General Motors bondholders and the largest U.S. auto union are betting the new president, an avid poker player, may now be using bankruptcy as a stick to get all parties to reach a deal…

In setting a two-month deadline for GM and a one-month deadline for Chrysler, the calculation from bondholders and the UAW is that Obama is trying to force their hand and reach an agreement.

“It is a big game of chicken,” said Gregory Peters, chief U.S. credit strategist for Morgan Stanley in New York. “My gut feeling is bankruptcy is not an option for GM and Chrysler. Either in bankruptcy or out of bankruptcy, this is a high-stakes game.”

If so, that’s a pretty high-risk game of chicken. I tend to think that bankruptcy is a real possibility. The fact that new GM CEO has begun talking about it as a possibility and even mentioned specific forms the restructuring might take suggests that they’re beginning to believe it, whether the threat ends up being a bluff or not.