Why a Chrysler Bankrupcy is Bad for GM & Ford

There is wide speculation that Chrysler Corp is on the verge of bankruptcy. That would help GM & Ford, right? ------- WRONG!!!

If Chrysler goes into bankruptcy reorganization (I cannot fathom that they would liquidate), it would likely force GM and Ford to do the same. If all three domestic auto makers go BK, it would be catastrophic for our nation's economy.

Make no mistake, Chrysler has cost problems, but their fundamental issue is one of product.

Consider this; Edmunds.com shows 120 SUV models that are marketed in the US. Chrysler has 11 of those models. Similarly, Edmunds shows 113 compact and mid-size sedans - of that total, Chrysler has two. To take it a step further, Chrysler's SUV lineup has a lot of duplication. The Jeep Liberty, Compass and Patriot are relatively close cousins. Likewise, the Chrysler Aspen and Dodge Durango are similar. Now, nobody ever asked me to bring potato salad to the Mensa picnic, but at a time when gas prices are moving toward $5.00 per gallon, I surmise that you just might have a problem when your model lineup has more than five times as many SUV's than compact and mid-size sedans. One more point related to product. By Edmunds classification, Chrysler has ZERO compact sedans!

If Chrysler goes BK, the courts will be pressed to do whatever reasonably possible to right the ship and to do so quickly. The court will have very limited ability to address the model mix, and even so, getting that mix to where it needs to be will take years. Instead, things like the invalidating labor contracts, reducing or eliminating pensions, and worker health care benefits, canceling financial obligations on surplus property, and facilitating plant closures that currently cannot be implemented will be the order of the day.

Reorganization largely sanctioned by the courts will put GM & Ford at a distinct disadvantage. It is an obstacle that might only be overcome by following the same bankruptcy path.