Now for the good news. When this happens, it is likely to cause scarcely a ripple of panic, and the stock market averages are unlikely to plunge. If Chrysler and GM had declared bankruptcy in December, instead of May, you might have had a panic rivaling 1929.
Indeed, you had prominent figures like Jennifer Granholm running around saying that nobody would buy a car from a bankrupt automaker. Rick Wagoner, then the GM chair, kept repeating stiffly that “bankruptcy is not an option.“ He’s gone now, and in a perverse sense it seems he was right. Bankruptcy is not “an option.”
It is the only option. But judging from what seems to be happening at Chrysler, it may not be fatal. People are still not buying many cars, but some of those who do are still buying Chryslers.
In fact, there are also signs that a revitalized, if smaller, Chrysler Corporation could emerge from bankruptcy as early as the end of next week. That’s because the ailing bride has a suitor ready and willing to take Chrysler to the altar - the Italian automaker Fiat.
And it is also because all this was carefully and intelligently planned by both Chrysler and Obama administration officials. Now it’s not certain that Chrysler will emerge from bankruptcy that quickly.
That’s up to U.S. Bankruptcy Judge Arthur Gonzalez. Next Wednesday, Chrysler is expected to ask him to both approve the sale to Fiat, and waive the normal ten-day waiting period.
Indications are that he may well do that. If he does, the Obama Administration has indicated it will give the automaker a $4.7 billion loan as a sort of wedding present.
Chrysler won’t be out of the woods. The sale is being challenged by some unhappy investors, and some in Congress aren’t happy about the dealership closings.
And then there is that pesky little problem they’ve yet to solve, one that plagues all our car makers, that of getting back to actually making a profit again. General Motors faces that problem too.
Even Ford, the one automaker not now a ward of the state, is still losing money, though less than it was.
Solving that problem of profitability isn’t likely not something the government can help any of these automakers with, not very much.
But whatever happens next, the Obama Administration has done two things I consider remarkable. Using loans and a creative use of bankruptcy as a surgical tool, the government has forced these automakers to make the hard decisions they had avoided.
Even more amazing may be that the government has gradually helped lead all of us to see that Chapter 11 doesn’t necessarily mean the end of the world for Chrysler and General Motors.
So, congratulations, Mr. President. And oh yeah -
Now for the hard part.