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Coming And Going: GM And Chrysler Cross Bankruptcy Paths

GM Headquarters
GM Headquarters

Somewhere Walter P. Chrysler and Alfred Sloan are shaking their heads. The men who left an indelible impression on the American auto industry must be watching what will happen today and wonder, "do these guys really have a shot at making it?"

While much of me wants Chrysler and GM to emerge from bankruptcy and grow, I have major concerns.

GM:

The government says there are further management changes coming at GM and the White House says it doesn't want to influence GM's business day to day. So if GM struggles over the next year or two, will Uncle Sam patiently stand on the side and not say something?

The truth is, with the feds now owning 60% of GM there will be pressure on the Treasury Department to do something if GM struggles. The auto business is a long lead business where a company is spending millions on new models that come out in 3-4-5 years. Sometimes management makes the wrong call.

Will American tax payers be patient.

Chrysler:

Today a bankruptcy court judge has approved Chrysler's saleinto a new company. That company will be controlled by Italian auto maker Fiat. The game plan is to bring small cars, a strength for Fiat, into the Chrysler line-up and make a "truck heavy" company more competitive across the board.

So what's the problem?

The problem is Chrysler has been withering away with limited investment in future products. Oh yes, company executives have said for months, "We've got a great line-up of new models on the way." Fact is, the Chrysler product pipeline is pretty dry. As the company slumped further and further, Cerberus Capital was cutting, not investing in future products.

Chrysler's challenge now is to churn out new models quickly.

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