GM Has Turned the Final Page Before Chapter 11.

It doesn’t take an economic guru to realize the desperate state of the U.S. auto industry. Two of the Big Three car makers—Chrysler and General Motors—have grown utterly reliant on a lifeline of government cash.

The prospect of a deal between Chrysler and Fiat Spa, spearheaded by the Italian automaker’s boss Sergio Marchionne, has brightened the dismal and seemingly hopeless future of the sickly automaker. However, Chrysler still has much more to clean off its plate before it can straight-facedly ask for a second chance to pioneer American auto development.

“General Motors, once the pinnacle of U.S. industrial primacy is on the brink of financial collapse,” say Bill Vlasic and Nick Bunkley in their New York Times article, “G.M., Leaking Cash, Faces Bigger Chance of Bankruptcy.” GM’s market capitalization is now less than 1 percent of its Japanese arch-rival, Toyota.

This poses two important questions. First, what are the chances of GM entering into bankruptcy? And second, if it does file Chapter 11, how should it go about the process?

In a recent MarketWatch article, Shawn Loinglois reported that “Last week, GM posted a first-quarter loss of $6 billion, or $9.78 a share, vs. a loss of $3.3 billion, or $5.80 a share, a year ago and said it burned through $10.2 billion during the three-month period.” GM’s capital reserves are down to almost nothing. The company is confronted with mounting retirement costs and plunging profit margins.

In seeking to gauge the probability of bankruptcy, KeyBanc Capital Markets analyst Brett D. Hoselton notes, “Chrysler is the best indicator at this point of where we’re heading with G.M.” In other words, bankruptcy “is looking like a real high probability.”

It is difficult—and perhaps even counterproductive—to provide specific numerical data stating the likelihood of GM filing for Chapter 11—is there a 50 percent chance of bankruptcy? 60? 70? As Fritz Henderson, GM’s chief executive, stated, “I’m not going to get into relative percentages and probabilities, but certainly the tasks that we have in front of us are large.”

However, one thing is certain: there is at least a big enough chance of the car maker filing for Chapter 11 that the American people and the U.S. government need to employ prescience in preparing for such an event.

So, in preparation, will there be damages or advantages—or both? Assuming that all goes swiftly and smoothly—which is quite an assumption—only those unfavorable scratches and dents which are absolutely necessary and unavoidable will occur.

Sounds good so far. Yet, reality demands a more, well, realistic analysis. “Emerging out of bankruptcy would be very difficult. Given its very large, global operations and various stakeholders, the process will take a lot longer than what people think,” a source familiar with the matter said.

GM Chief Financial Officer Ray Young casts a rather bleak milieu when he explains the effects of the bankruptcy process: “Once you start losing revenues, you get yourself into a vicious cycle from which you cannot recover.”

Thus, a quick recovery should be at the epicenter of focus for all involved in the bankruptcy process. Of course, there will be difficulties. But, in order to avoid a spiraling cycle of plunging revenues, GM and the Obama administration must strive to overcome those difficulties—whether it is via compromise or standing firm on their position.

On a much lighter note, bankruptcy may not be such a bad thing after all. According to Mr. Henderson, “Given the objective that we set for ourselves, it’s more probable that we would need to accomplish our goals in a bankruptcy.” So, in the end, Chapter 11 may not only be necessary for GM—it could also be the best path towards getting the automaker back on its feet.