With the help of the government backing and speed of the section 363 sale of Chrysler to Fiat, the “new” Chrysler began emerging from bankruptcy court Monday. However, that is not the end of the bankruptcy. The “old” Chrysler could remain in bankruptcy court for many more months or even longer. Some previous Chapter 11 filings, such as Enron, have continued for over a year.
Prior to their bankruptcy filing, both Chrysler and GM were unable to sell certain possessions, including the Dodge Viper plant for Chrysler and the Hummer and Saturn brands for GM. Both companies have been actively courting potential buyers for their remaining assets that they are desperate to purge. But in this buyer’s market, there are too few buyers and no takers for assets that might be liabilities
With Fiat’s help, the new Chrysler will move ahead to bring new vehicles to the U.S. market, specifically smaller, fuel-efficient cars of the type that the “old” Chrysler was lacking. The true test for the “new” Chrysler will be how Americans will react to Fiat imported and eventually co-developed cars and how they will compete.
The GM Chapter 11 bankruptcy will be more complex than the Chrysler deal. The much larger GM will sell off or otherwise dispose its four less-successful brands and close 11 factories as part of the “old” GM. The “new” GM will focus on four core brands: Buick, Cadillac, Chevrolet, and GMC. Liquidation of other assets will likely take years in court, but the formation of a “new” GM is expected to take between 60-90 days.
Once the “new” GM emerges leaner, less debt-laden, and sizes appropriately to its market share, it might potentially be able to better focus on building vehicles that are more competitive with foreign automakers. Both Chrysler and GM will need to work hard to meet the new CAFÉ requirements. To accomplish this, they will need to skew their product portfolio toward smaller, lighter models and expand the use of electrified (hybrid or pure EV) powertrains. Chrysler is working on electric versions of several traditional models, while General Motors is readying for production the small, thrifty Chevrolet Spark and the Chevrolet Volt extended-range electric car.
Vehicle showrooms will look a bit different with fewer vehicles and brands to choose from, and with dealer closings numbering in the thousands over the next 18 months, those car stores may be fewer and far between. The lineup will consist of current popular models, but there will be a gradual shift to new fuel-efficient cars. Ultimately, only new competitive vehicles will help these automakers get back on their feet. However, gas prices an uncertain economy and lingering image problems are still part of the equation and will help determine how quickly Chrysler and GM can return to profitability.