Wrong. Bankruptcy laws are setup so companies can remain in business while they re-organize their debt. Under bankruptcy protection both companies could have continued producing cars while they reduce loan payments, renegotiate labor contracts, and setup new terms with their suppliers. Neither company needed those loans, and we wouldn't have a leftover stigma in the bond market from when Obama forced bondholders to be the last to get paid when by law they should have been first. The loans were a bad idea, the subsequent bankruptcies and the boondoggle they came will be not forgotten soon. Quite frankly if a company is not organized well enough to handle the worst of times they don't deserve to enjoy the best of times.
Source-- The Economist :
http://www.economist.com/node/16846494
So was the auto bail-out a success? It is hard to be sure. Had the government not stepped in, GM might have restructured under normal bankruptcy procedures, without putting public money at risk. Many observers think this unlikely, however. Given the panic that gripped private purse-strings last year,
it is more likely that GM would have been liquidated, sending a cascade of destruction through the supply chain on which its rivals, too, depended. As for moral hazard, the expectation of future bail-outs may prompt managers and unions in other industries to behave rashly. But all the stakeholders suffered during GM’s bankruptcy, so this effect may be small.
Socialists don’t privatise
That does not mean, however, that bail-outs are always or often justified. Straightforward bankruptcy is usually the most efficient way to allow floundering firms to restructure or fail.
The state should step in only when a firm’s collapse poses a systemic risk. Propping up the financial system in 2008 clearly qualified. Saving GM was a harder call, but, with the benefit of hindsight, the right one. The lesson for governments is that for a bail-out to work, it must be brutal and temporary. The lesson for American voters is that their president, for all his flaws, has no desire to own the commanding heights of industry. A gambler, yes. An interventionist, yes. A socialist, no.
