Chrysler has not exactly set the world on fire either. It torched $8 billion last year. Some of its investors now value their stakes at pennies on the dollar -- or nothing. Its U.S. sales have plunged by nearly half over the last decade. In this year's Consumer Reports rankings of the 10 worst cars, seven are GM or Chrysler products.

The administration's own industry task force doesn't share Obama's unbounded optimism. In a report released this week, it noted that GM's supposed salvation, the plug-in hybrid Chevrolet Volt, "will likely be too expensive to be commercially successful in the short term."

It ridiculed GM's own cheery forecast, which assumes rising profits "despite a severely distressed market, lingering consumer quality perceptions and an increase in smaller vehicles (where the company has previously struggled to maintain pricing power)." Even under generous assumptions, it said, GM would keep losing money.

Given all these sad tidings, it's hard to avoid the conclusion that the only hope is bankruptcy court -- where it could shed some of its obligations by stiffing creditors and rewriting union contracts. Obama seems to think the auto industry is too important to be subjected to such an indignity, though he has not ruled it out.

But to survive in the long run, a company has to provide consumers with products they want at a price that yields healthy profits. That is exactly what GM, like Chrysler, has consistently been unable to do.

In those circumstances, neither bankruptcy nor any other course offers a plausible route to prosperity. Plausibility, however, is not a consideration among politicians determined to keep the Big Three in business no matter what.

In recent months, we've been told that ambitious federal action is needed in the financial sector because unregulated commerce produced disastrously perverse results. But in the auto industry, competition has functioned reliably to reward sound companies and penalize bad ones. So clearly, there are only two occasions for massive government intervention: when the market fails, and when it works.