Chrysler to go Bankrupt?

The lead story in today’s New York Times is titled, “U.S. Said to Seek a Chrysler Plan for Bankruptcy.” It describes efforts by the Treasury Department for Chrysler to prepare a Chapter 11 bankruptcy.

The story leaves open a major question: are the bankruptcy preparations actually genuine or do they represent an attempt to forge an agreement betweeen Chrysler and its lenders.

Buried in the continuation is a comment by Jeremy Anwyl, the chief executive of Edmunds.com, an auto-related web site. He said, “You have to proceed as if it’s happening, and in doing so, you may avoid it.”

I tend to discount his theory. There are several ominous signs of an impending bankruptcy. An agreement has been reached with the U.A.W. And the four major banks, JPMorgan Chase, Citigroup, Morgan Stanley and Goldman Sachs, who hold 70 percent of the debt, are interested in making a deal with the government.

The implications of a bankruptcy, should it occur, are enormous. It will cross a red line making this recession different from any of the preceding ones, and it augurs a deeper and more pronounced downturn than the one currently envisaged by more optimistic members of the Obama administration.

The bankruptcy would also mark the end of an era in American manufacturing and a final transition to an information-based economy. That, however, has been in the cards for many years now.

(To read an analysis of the New York Times lead story each morning, visit <a href=”http://www.cioediting.com/wordpress”>The New York Times Leader</a>.)