So it’s descending to chaos. Senate has rejected the life-support plan for Detroit. Earlier this week the House of Representatives and the White House stitched together a plan. But when that bill was put to the Senate, a hard-core of Republicans kicked it out. Ford might be able to save its own skin, but GM and Chrysler, in their present form, look doomed.
One flicker (no more than a flicker) of hope is that the President could still divert some funds, from the $700bn bank bailout plan, into the car industry. But a week ago he refused to do this.
So now GM has hired bankruptcy advisers. Chapter 11 bankruptcy in the US is like going into receivership in the UK. A company doesn’t have to pay a lot of its debts, while it’s hacked about by accountants into a shape where, with luck, it can be sold on.
People point out that many US airlines went into bankruptcy in the months after people stopped flying following the September 11 attacks. And it didn’t cause them to lose any more passengers. Well yes, but buying a ticket from a bankrupt airline is simple: all you need to know is that it’ll still be in business when the plane takes off. You can presume it’ll then land safely.
Buying a car is different from buying a plane ticket. You want the company still to be in good shape several years down the line, to protect your car’s used value and parts supply.
So I reckon if GM and Chrysler go into bankruptcy, their sales will fall catastrophically. Even more than the fall (by up to half) they’ve seen in the US these past weeks while they’ve been in limbo-land. Just look what happened to Rover sales when it became clear the company wasn’t long for this world.
I think Chrysler will inevitably fail now. Someone (Koreans? Chinese?) will buy the Jeep name cheaply afterward. And if there are no Chryslers or Dodges for sale, that will give a bit of market share to GM and Ford.
But GM? No idea. The spectre of mass unemployment in the US sent Asian stock markets into decline as soon as the news came through. Shockwaves will be felt everywhere for a long time.
And as for Vauxhall, Opel and Saab, your guess is as good as mine. Or as good as that of anyone who works there.