Auto task force adds bankruptcy lawyer

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Either the federal government wants to frighten the GM (GM), Chrysler, the UAW, and the firm's creditors, or Washington is taking a harder look at Chapter 11 as a solution to the auto industry's problems. According toReuters, 'The task force hired Matthew Feldman, a partner in the business reorganization and restructuring department at New York law firm Willkie Farr & Gallagher LLP."

The announcement may be a bluff. The administration still has to deal with the fact that a Chapter 11 filing, even with the government stepping in with capital to keep the companies operating, could mean the layoffs of tens of thousands of workers. As many analysts have pointed out, a sharp downsizing of the two car companies would cause a chain of closings at suppliers and the ripple effect would put hundreds of thousands of jobs at risk.

The UAW and creditors still have one major advantage in the negotiations. They know that the Administration's stimulus package and its promise to add or save three million jobs would be undermined by a collapse in Detroit. The union and financiers may simply gamble that that is a risk the government will not take.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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