GM bankruptcy would be complex, painful

Allison Linn Senior writer • Profile • E-mail

If General Motors follows Chrysler into bankruptcy court, as many are now expecting, it is likely to be far more painful for both the carmaker and the U.S. economy than its smaller rival’s bankruptcy filing of a few weeks ago.

GM's vast scale and complex network of partners make the ramifications of a bankruptcy highly unpredictable, especially given the uncertainty about the global economic conditions that pushed the auto industry to the breaking point in the first place.

“The biggest difference is scale: GM is a much larger company,” said Stephanie Brinley, senior manager of product analysis for the consultancy AutoPacific.

GM has more plants, nearly five times the number of employees and twice as many dealers as Chrysler, whose own bankruptcy proceeding is not guaranteed to run as smoothly as the promised lightning-fast timetable of 30 to 60 days would suggest. In addition, GM's larger footprint means that auto parts suppliers are more reliant on it.

“When you look at … all of the, let me say, tentacles of General Motors on a global basis, you know it’s going to be much more complex than Chrysler,” said Dennis Virag, president of The Automotive Consulting Group Inc.

GM also has a broad network of international operations, including its troubled Saab and Opel units and a cadre of other overseas facilities. That means a potential GM bankruptcy filing could have a broader international ripple effect than Chrysler’s bankruptcy filing did.

Fact file: GM vs. Chrysler Employees Chrysler: 54,000* General Motors: 244,500 Vehicles sold, 2008 Chrysler: 2.01 million GM: 8.35 million Major U.S. brands Chrysler: Chrysler, Dodge, Jeep GM: Buick, Cadillac, Chevrolet, GMC, HUMMER, Pontiac, Saab, Saturn Dealers Chrysler: About 3,200 GM: About 6,000 *As of December 2008

Stephen J. Lubben, a law professor at Seton Hall Law School, said the bankruptcy proceedings themselves could hurt the company’s global operations by making it difficult for them to get the cash they need to keep doing business.

Lubben said another key difference is that Chrysler went into bankruptcy with a plan to emerge in partnership with Italian automaker Fiat. He thinks Chrysler will benefit from having Fiat offer a fresh perspective on the company’s operations.

“At least we can have a little confidence that an outside person has taken a look at this and deemed it a viable plan, whereas in GM’s case we don’t have that check on the process,” Lubben said.

But Brinley, of AutoPacific, offered the opposite view, saying she thinks GM would benefit from not having another automaker in the mix during the already complex bankruptcy process.

“I think that’s an advantage. GM, in one way or another, is in a little bit more control of their own destiny,” Brinley said.

Brinley also said she thinks GM doesn’t need a partnership such as the Fiat one because it already has smaller, fuel-efficient cars in its product line. One key reason Chrysler pursued a deal with Fiat was to expand its product lineup.

Still, a bankrupt GM would have to answer to a bankruptcy judge and perhaps the U.S. government, if the bankruptcy were structured similarly to Chrysler’s.

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