GM a much harder nut than Chrysler

04 May 2009

President Barak Obama and his economic team are hoping that the hard line they took on Chrysler LLC last week, forcing it into quick bankruptcy protection, will give them leverage to force huge changes in General Motors, a far larger and more complex company.

Officials say that while the US president's decision on Wednesday to take all the risks of a Chrysler bankruptcy was difficult enough, the politics of reshaping GM will be far harder. Already a shadow of the company that once dominated the American landscape, G.M. will be forced to eliminate tens of thousands of additional jobs and close factories and dealerships nationwide.

In Chrysler's case, the tough job-cutting decisions had already been made and the government is taking only a small stake. An alliance with Fiat envisions selling the company's cars in new markets around the world and adding cars that use Fiat's fuel-efficient technology.

But in GM's case, Obama will be forcing deeper cuts, with the government becoming the controlling shareholder. He will also be overseeing the radical downsizing of GM's workforce even as he is trying to reverse rising unemployment.

''GM is very different than Chrysler,'' Rahm Emanuel, Obama's chief of staff, said on Friday. ''But I suppose the one lesson for GM, and all the other players, is that this is a moment when a Democratic president said, 'I am really willing to let a company dissolve, and there's not going to be an open chequebook'. There's got to be real viability.''

No one thinks Obama is going to allow GM to be broken up, its assets sold or abandoned. But if the Chrysler legal process unfolds as the White House hopes it will in coming weeks, the bankruptcy option may look increasingly attractive for GM as well, officials on Obama's automotive task force were reported to have said.