GM Needs a Bailout, but It Is No AIG

General Motors (GM Quote) made its case for federal help during a dismal third-quarter earnings report Friday. But while the government's recent handouts to the financial sector have been substantial, such help for the nation's largest automaker involves a number of different considerations.

Though the automakers have appeared at risk of a bankruptcy for several months, the issue became more urgent Friday as General Motors reported that it burned through $6.9 billion. The company also drew down the remaining $3.5 billion from its secured revolving credit facility and made $1.2 billion in bankruptcy-related payments to parts supplier Delphi.

But the market does not appear nearly as worried about GM as it was about Lehman Brothers in the days before it filed for bankruptcy in September or American International Group (AIG Quote), which threatened to do the same just days later, before receiving an $85 billion bailout by the federal government. The Dow Jones Industrial Average close up 248 points on Friday, despite the poor financial reports from GM and rival Ford (F Quote).

That could be because investors sense a bailout for GM is in the works. More likely, though, it is because investors are used to the situation. The U.S. auto industry has been failing for much of the last forty years, as the world has passed it by.

If GM goes bankrupt, all cars around the world will not suddenly break down. But if AIG had failed, lending could have stopped altogether. The insurer was a counterparty to billions in credit default swaps, unregulated securities that insure against credit risk, and if AIG went under the unwinding of its tangled web of trades would have had dire consequence for financial markets, regulators feared.