Just a few months ago, the prospect of the government letting a major car company go into liquidation seemed impossible. Surely, in an effort to protect the UAW, the big three would be propped up as zombie autos in some way or another.
But it looks like the weakest of them, Chrysler, may be kaput. Not restructured, not forced into some kind of government-sponsored pre-packaged bankruptcy, but actually scrapped for parts in an auction.
The Journal reports that the government is still trying to work out a deal between Chrysler, Fiat and the UAW, before the April 30 deadline. But the thinking is that no solution will be worthwhile, and that a Chapter 7 bankruptcy filing might be the best option, and that could come as soon as next week.
Of course, Chrysler is the test case, the canary. A liquidation would serve as a warning to GM (GM) and its bondholders that they better get their act together in the next month, because the government has the will to take drastic action. On the other hand, if the government caves and decides it can’t stomach the fallout from a Chrysler liquidation then it’s impossible to see how there could be any headway with GM at all.