Automakers teeter on verge of industry shutdown

DETROIT -- Both automakers are teetering on the verge of bankruptcy. Chrysler has just six days to complete a deal with Italian automaker Fiat or be cut adrift without government support. President Obama has said that if the two can't hammer out the details — which include a deal with creditors to cut Chrysler's debt load — he won't approve further loans for Chrysler, and it will end up in bankruptcy court.

A source briefed on the talks, who did not want to be identified because they are not public, said Chrysler's bondholders are preparing to make another offer on debt reduction by this morning. A steering committee of some bondholders had proposed earlier this week a deal that would cut Chrysler's debt from $6.9 billion to $4.5 billion. The Treasury has said Chrysler needs to cut its debt to $1 billion, though creditors could get equity.

On Thursday, GM announced specifics of plant closures that will slash production by 190,000 in the second and third quarters. Thirteen North American assembly plants will close for weeks at a time, three for nine weeks, starting next month.

A combination of GM's production cuts and a bankruptcy filing by Chrysler if it misses the government deadline next week could trigger an industrywide shutdown, says Kimberly Rodriguez, co-head of Grant Thornton's global automotive practice. Many auto suppliers are so fragile now that they could not survive both the production cuts and possible slower payments from a Chrysler in bankruptcy court.

"Suppliers are on such a thin thread," Rodriguez says. A domino of failures "would generate an industrywide whiteout."