Under normal circumstances, companies try to put the best face on bad news. But we are not in normal circumstances.

Look at the GM report—they made no attempt—indeed, seemed to emphasize—the dire circumstances. The one-hour delay in the release—complete with scenes of a crowd of traders standing by idly while the stock was halted awaiting the news—only added to the sense of drama.

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[GM  Loading...      ()   ], importantly, seems to have distanced itself from merger negotiations with Chrysler. This makes sense from GM's point of view.

The moment of reckoning has arrived. GM made it clear that they will soon run out of cash unless the industry recovers quickly (unlikely), they sell assets (difficult), or receive a capital infusion from the government or private industry.

Automobile Industry Failing

• GM, Ford Losses Deepen; Industry Outlook in Doubt
• GM's Wagoner: No Plans For Bankruptcy Filing

This makes an infusion from the government increasingly likely. Most traders on the Street do not think the government will let GM go bankrupt.

But a massive infusion into GM (debt or equity) means dilution (or worse) is now very likely for equity holders. As for Chrysler: it's difficult for GM to buy them when GM itself needs to SELL assets.

Look at the stats: Chrysler is a company with 90 percent of its sales in the U.S., 70 percent of those sales are trucks. GM is a much more diversified company. Any merger with GM would still involve massive layoffs at Chrysler and occupy large amounts of time and money on a restructuring effort of doubtful value.

As for the argument that Chrysler is too big too fail: they successfully made this argument in 1979, when Congress passed the Chrysler Corporation Loan Guarantee Act (remember Lee Iacocca? "If you can find a better car, buy it.").

What happened? Several billion in loans, and the military bought Dodge pickup trucks by the thousands.

As the economy improved in the 1980s, Chrysler, with the help of the K-car franchise, did improve its sales and pay off the loans. They bought AMC in 1987, but aside from the Jeep brand, few other brands survived from that line.

Daimler-Benz bought Chrysler in 1998, but despite a strong economy the company's vehicles, for the most part, were a bust with the public.

Hard to believe that it has only been a year and a half since Daimler sold an 80 percent stake in Chrysler to Cerberus for $7.4 billion. Every step along the way, Chrysler and the others have shed jobs, even in good times.

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