What does Chrysler's filing mean for GM, suppliers

Lemos-Stein predicts there will be a lot of bumps in the road, including many auto-supplier bankruptcies in the coming months. Many suppliers already were reeling from the news that GM is shutting down many of its assembly plants for up to nine weeks starting this month.

Despite pledges of a quick court process, no one can guarantee it. The case was filed in the Southern District of New York, which has experience with speedy bankruptcy cases. Still, judges are obliged to listen to each interested party that wants to be heard, which could drag out the process.

The automaker's bankruptcy filing listed assets of $39 billion. Its top 25 unsecured creditors — suppliers, attorneys and advertising firms — are owed $575 million.

The line's already forming. According to documents filed with the court, 14 auto suppliers say they are interested parties. Ford and Mercedes-Benz have filed asking to be notified of anything going on in the court. A group calling itself the Committee of Consumer Victims of Chrysler LLC and also the Ad Hoc Committee of Mesothelioma and Lung Cancer Claimants have filed.

The list will likely keep growing.

There are other big questions, such as what happens to Chrysler's financial services arm? The government named GMAC as Chrysler's new financing company, and it's still unclear what that means for Chrysler Financial. That company is now at risk of bankruptcy, too, Lemos-Stein says.

There is also concern that the bankruptcy filing will scare away consumers, who might wrongly believe it means Chrysler is going out of business. Thursday, Obama pointed out that the government is backing Chrysler's warranties.

"No one can blame car buyers who shied away from brands that were mentioned in the same breath as the word 'bankruptcy,' " said Philip Reed, consumer advice editor for Edmunds.com. "Now that their warranties are being guaranteed, Chrysler and GM vehicles are good deals which are worth considering."

But it may get harder to find a dealer. Chrysler has 3,200 dealers, and the company believes it needs no more than 1,500.

John McEleney, chairman of the National Automobile Dealers Association, says he hopes Chrysler doesn't use its bankruptcy filing as a way to get rid of dealers.

"Dealers generate more than 90% of manufacturer revenue and are not a cost to the automaker," he says. "A rapid reduction in dealer numbers would not only do absolutely nothing to improve Chrysler's viability in the short term, but it would actually work against Chrysler's stated objective to increase revenue and cut costs."

History of troubles

The last American automaker to file for bankruptcy was Studebaker in 1933. After emerging from bankruptcy, it continued operating, albeit struggling at times, until the mid 1960s.

This isn't the first time Chrysler has found itself in trouble. In 1979, then-CEO Lee Iacocca persuaded the government to guarantee $1.5 billion in loans that the automaker wouldn't have otherwise been able to get. Chrysler returned to profitability in 1983 and repaid the loans early.

David Lewis, professor emeritus of business history at the University of Michigan's Ross School of Business, says Chrysler can turn itself around: "It has a way of coming through. Particularly now, with the government committed."

And with Fiat on board.

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