Running on Empty

But the decision to go Chapter 11 might ultimately be out of the auto bosses' control. If cash runs down and bills come due, it will be the creditors driving the companies to bankruptcy court. "GM would rather light its toes on fire than go into bankruptcy, but it could reach a point where they have no choice," says Lombard. "A bond could come due and they might have to throw up their hands and say, 'We don't have the cash.'"

In Detroit, bankruptcy has always been viewed as the kiss of death. The conventional wisdom held that no one would buy a car from a bankrupt automaker. And that might well be true. But since very few people are actually buying cars at the moment, this could be viewed as an opportune time for Detroit to get its house in order under Chapter 11 reorganization. (And most analysts believe once one Detroit automaker goes Chapter 11, the others must follow so that they get the same cut-rate deal from creditors). "There aren't as many people out there shopping now, so you've got a lot less to lose," says Keller. "Maybe this is the time to do it and then you come out smaller, more focused companies." Some analysts even suggest that through bankruptcy, the Detroit Three could be whittled down to the Detroit Two or even the Detroit One, with combined forces and brands that can finally take on the world.

But the road trip through bankruptcy would be the ride from hell for Detroit and its industrial neighbors in the upper Midwest. Thousands of car dealers would be closed and tens of thousands of workers would lose their jobs, as bankrupt automakers would use the courts to tear up contracts with their once powerful unions and retailers. The population drain from the rust belt would accelerate, leaving permanently weakened economies wherever an auto factory once stood. In fact, Detroit's shock would course through the entire economy, especially in its anemic state. More than one in 10 jobs in America are connected to the auto industry, according to the Center for Automotive Research. And auto production represents 3 percent of the gross domestic product (down from 4 percent when times were good). "It will make an already bad economy even worse," says Casesa. "But for the upper Midwest, this would be a disaster."

That it has come to this, leaves Detroit feeling dizzy. Auto execs continue to point to turnaround plans formulated before the bottom fell out, as if the old rules still apply. But the reality is that as the economy rapidly takes a deep downturn, Detroit's prospects grow ever bleaker. "This is far uglier than anyone imagined," says Keller. "The economy is unraveling right underneath our feet." And that means Detroit could be running out of road.

© 2008