Tracking the Bailout: When the Music Stops, Who's Going Bankrupt?

The CEOs of Ford Motor Co., General Motors Corp. and Chrysler LLC loaded up on their much-maligned corporate jets and winged out of Washington, DC, this week with no bailout money - but the assurance of a shaky holiday season.

After Democratic deal-makers conceded this week there would not be sufficient bipartisan support to approve a bill to "repurpose" the existing and already approved $25-billion Department of Energy loan (originally intended to promote the development of fuel-efficient technology and retool factories), the initiative was shelved until a possible vote on Dec. 8.

That promises to be a rocky 17 days for GM and Chrysler, whose bosses insinuate the companies may not have the funds to enable them to see the New Year.

Costly Holding Pattern

Many Congressional members - some of them lame ducks with barely weeks left in office - seemed as concerned about getting home for the Thanksgiving holiday as they did about putting in the heavy lifting required to potentially help resurrect the nation's largest single component of the manufacturing sector.

Others, however, remain either doubtful GM and Chrysler face imminent insolvency or unconvinced one or both companies' slide into bankruptcy (presumably of the Chapter 11 variety) is not the best way to let economic forces take their course.

Congress sent the chastised CEOs back to Detroit with instructions to work up a blueprint to demonstrate a cash infusion will keep them viable long enough to transform their business models into something approaching sustainability.

But at this juncture, even the matter of the few weeks before a potential new vote - a vote with anything but a guarantee of approval - could be too long for at least one of the two industrial giants to wait.

That could be the plan.

Chrysler Without A Chair

Although GM chief executive Rick Wagoner insinuated his company is in desperation mode, it is Chrysler that likely is closer to the brink; CEO Bob Nardelli said the company's cash-in-hand exceeds its monthly expenditures by a mere $1 billion and change. That suggests if Chrysler isn't extended some type of funds, the music stops sometime around the end of December.

Rumors continue to abound that GM, meanwhile, has a plan in place to effectively shut down the company - across the globe - if necessary to reduce expenditures to a level that allow GM to keep its head above water.

Meanwhile, although industry sales have cratered in the latter part of this year, December historically is a comparatively strong month for auto sales. A skeleton-crewed GM, one with dealers continuing to sell vehicles, could temporarily stem the titanic cash burn that has scorched the company's books.

Even without a drastic "winter shutdown," some sources think a parsimony-minded GM could keep going enough, at least, to wait for President-elect Barack Obama's mid-January inauguration and perhaps a change in Congress' - and the public's - mood about assisting the automakers.

Not Enough For Three

Meanwhile, with the auto market not expected to improve and more likely to deteriorate further in 2009 and thus the cash-burn rates presumed to remain consistent (although continuing cost-cutting efforts may reduce expenditures a measurable, if not exactly meaningful, amount), it's not hard to do the math. Even if the hoped-for $25-billion in funds, which is designated to be shared with desperate auto suppliers as well, is approved and made available by sometime early next year, it's not going to be enough to sustain three battered automakers who between them have spent an almost unbelievable $18 billion more than they took in during the last quarter.

At that rate, $25 billion would not take the current Detroit Three to the beginning of a new baseball season.

Forecasting expert IHS Global Insight this week issued a warning that without the bridge loan, the odds that GM and Chrysler both would file bankruptcy early next year are 75 percent.

But the larger question seems to be whether even with the loan, whether it could possibly sustain all three anyway.

While political grandstanding certainly has a role in the current situation, the delays Congress' vacillation impose may be serving a deeper purpose: culling the Detroit Three to just two.

It's long been assumed Chrysler is the weakest of the trio, the least able to pull off a "transformation:" it has no global footprint to speak of; it has the smallest market share; and it has the heaviest ratio of trucks and SUVs in its portfolio, vehicles that do not place the company in good stead either with consumers or politicos scrutinizing the possibilities for a prompt turnaround.

Finally, there is Chrysler's uncomfortable status as a privately held company. Although to now this has not seemed to be an important point, it may emerge as one if push comes to shove next month in Washington.