On the edge

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: gold on the other side has been getting bigger as well,” says David Cole of the Center for Automotive Research.

However, there is considerable scepticism both within the industry and among analysts as to whether Chapter 11 is a way forward for GM and Ford (though it may, some concede, be more appropriate for Chrysler). Mr Cole says that “it would kill them in the market”. The fear is that rather than give the firms a breathing space in which they could complete the restructuring of their operations and extract further concessions from the union, Chapter 11 would set off a downward spiral.

Consumer surveys that suggest that 80-90% of prospective customers would abandon the products of a carmaker that had filed for bankruptcy protection. When airlines went into Chapter 11, most of their passengers stuck with them, reasoning they would be at least be in business long enough for tickets bought for trips just a few weeks away to be honoured.

Cars are different. A car is the most expensive purchase many consumers make, and by buying a car they also enter into a long-term contract. Buyers expect their 60,000-mile warranties to be honoured, parts to be kept supplied and their dealers not to have disappeared. Used-car values are also a critical part of the deal. If the firm that made the car has gone bust, it becomes virtually unsellable secondhand.

A further reason why Chapter 11 might not work for the carmakers, says Mark Oline, an analyst at Fitch Ratings, is that they have very little scope for further cost-cutting. “They’re not being crushed by wage and benefit costs—it’s about revenue and products now,” he says. Bankruptcy would do nothing to speed up the introduction of vital new models.

Those arguments may have weighed heavily with both Barack Obama, the president-elect, and the Democrats in Congress, who are moving towards sanctioning a bail-out package. They have gained added force from estimates of the economic fallout that could follow bankruptcy. Rod Lache, an analyst at Deutsche Bank, believes it would imperil many of the component-makers in North America, which in turn would hit the foreign-owned “transplant” factories that make up the rest of America’s car industry.