The death spiral of the American-owned automotive industry continues, with Barack Obama threatening to turn off the cash tap to Chrysler and General Motors if they don’t get their restructuring act together. Chrysler has been given 30 days to complete a deal with Fiat. General Motors 60 days to present the government with what it perceives as a viable restructuring plan. In both cases, if the government isn’t happy, no more support and they’ll go into bankruptcy.
While bankruptcy will not mean the end of either – aside from the likelihood that the government will again step in after bankruptcy, American bankruptcy laws are reknowned (perhaps notorious) for their ability to resurrect broken companies – it will mean the opportunity for a huge number of previously sancrosanct contracts to be broken. As Obama put it:
I know that when people hear the word “bankruptcy” it can be unsettling, so let me explain exactly what I mean. What I’m talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so that they can get back on their feet and onto a path to success; a tool that we can use, even as workers staying on the job building cars that are being sold.
In such circumstances, you have to wonder about the fate of high-cost, low-volume manufacturing operations located in a non-strategic country half-way round the world. The US government certainly isn’t going to bail out Holden.