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GM/Chrysler Job Cuts Just Part Of Very Scary Times

Thursday, 23 Oct 2008 | 9:05 AM ET
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CNBC.com
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These are scary times in Detroit. And no, that's not intended to be a cute play on words with Halloween a week away.

This morning GM and Chrysler announced a fresh round of job cuts due to the stunning drop in business and their balance sheets.

• GM will begin involuntary white collar lay-offs.

• Chrysler is moving up the closure of its Newark, Delaware plant and cutting a shift at its Toledo North plant. More than 1,800 jobs disappearing.

In both cases, the cuts are part of the automakers scrambling to conserve their dwindling cash reserves. GM is also suspending payments to employee savings plans.

All of this drives home the urgency facing these guys. While neither of them is drawing up bankruptcy plans, there is less and less time and options to save them from sliding to a point towards Chapter 11. Unfortunately for them, lining up the financing needed to swing GM buying Chrysler is problematic in this environment.

This is why I believe there's a growing likelihood of GM/Chrysler going to the federal government and asking for low interest loans to fund their marriage. And right now, I think there's a decent chance of it happening. Lawmakers do not want either of these guys to go belly up. It will put further strain on the economy, and leave the government on the hook for billions in pensions. So they will publicly decry Detroit's decision making, then privately admit that federal aid to marry GM and Chrysler is the best option.

It ain't pretty and likely will get scarier as we move closer to Halloween.

    • GM Prepares for Involuntary Layoffs of Workers
    • Jobless Claims Rise More Than Expected

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  • Phil LeBeau is a CNBC auto and airline industry reporter based in the Chicago bureau and editor of the Behind the Wheel section on CNBC.com.

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