The collapse of the motor vehicle maker General Motors and possibly its smaller rival Chrysler, which may be just weeks or even days away, is expected to send tremors through global financial markets and would lead to job losses, plant closures and economic uncertainty for a huge number of US, British and many other foreign car workers.
The GM and Chrysler saga has rumbled on for months, but one thing is clear: anyone who promotes bankruptcy as a quick, painless cure is wrong.
"This is truly scary," said John Wolkonowicz, senior automotive analyst at IHS Global Insight. "Neither the government nor GM has any control over the outcome if this goes to bankruptcy court."
Insolvency experts say a possible filing for Chapter 11 bankruptcy protection for GM alone would likely be protracted - lasting at least a year - and could be a blow to financial markets.
Malcolm McKenzie, managing director at Alvarez & Marsal, a US restructuring firm, said the collapse of GM and possibly Chrysler "would be a defining moment for the manufacturing sector" and would have the same impact on industry as the failure of Bear Stearns and Lehman Brothers had on the global banking system.
Although the US government has taken steps to soften the impact of a possible GM bankruptcy on car parts makers and American consumers, experts warn of a ripple effect that could see many suppliers fail and lead to knock-on effects in the US and abroad.
GM is a global company. It builds cars, trucks and vans at factories in the US, Canada, Mexico, Australia, South Korea, the UK and across Europe. Chrysler has plants in the US and Canada and a small operation in Europe. The company is locked in a bitter dispute with the Canadian Autoworkers Union and has already threatened to close plants in Canada even though workers in those factories are cheaper to employ and claim to be more productive than many of their US counterparts.
Canada is yoked together with the US in a North American common market for vehicles, so the impact of a GM bankruptcy would be immense on America's northern neighbour. General Motors of Canada is the largest vehicle maker in the country, directly employing 12,000 people. The company also has 700 vehicle dealerships and retail outlets, the most in Canada. Thousands of cars built in GM's Canadian plants are exported to the US and Latin America.
Britain, too, would be hard hit. In the UK, 5000 workers at GM's Vauxhall division are waiting to learn if they will keep their jobs after hearing GM was prepared to sell at a knockdown price.
GM is believed to be talking to at least six investors, including private equity groups and rival car manufacturers, such as Fiat and Shanghai Automotive, about taking its European operations, including Vauxhall and Opel, off its hands.
It is hoping to have a shortlist of bidders by early next month to accelerate the process of shedding its European business, leaving management free to concentrate on implementing sweeping changes in North America.
The company has struggled as car sales have fallen around the world, and has survived in recent months on a $13.4bn (£9.2bn) US government bailout. Last week Vauxhall made 1600 salaried staff redundant in a scramble to cut costs under a restructuring mandated by Washington. The reduction is part of GM's plans to cut its global salaried workforce this year by about 10,000, or 14%. GM also aims to cut 37,000 hourly jobs worldwide. The company said last week that it will temporarily close 13 assembly plants in the States and Mexico for between three and 11 weeks, laying off nearly 24,000 workers to pare back a bloated inventory.
At the moment, GM's European operations have enough money to last only until the end of June. It is believed that a buyer would have to be prepared to pump a minimum of 500m (£445m) into Opel and Vauxhall.
Vauxhall's factories are located at Ellesmere Port in Cheshire, and Luton, Bedfordshire. If GM does not secure additional financing, it may go bankrupt, putting those jobs at risk while a new investor might wish to cut employment costs GM has asked the UK Government for £500m towards a 3.3bn support package from European governments.
Germany, where Adam Opel employs 25,000 people, has ruled out a straightforward bailout, although it said that it would consider loan guarantees.
The US Treasury and Fritz Henderson, installed as GM chief executive in late March, are increasingly speaking of bankruptcy as an option and White House officials believe a filing could be quick and "surgical".
Henderson said recently that he still hoped GM would restructure outside court but that "the clock is ticking" on talks with unions and bondholders aimed at winning sweeping cuts to its costs and debt load ahead of a government-set deadline of June 1.
Henderson said GM was making contingency plans on "several tracks" and studying options, including a pre-packaged bankruptcy agreed beforehand with the US government, bondholders and unions, or the split of the company into more- and less-viable assets under Section 363 of the Bankruptcy Code.
Analysts said the statements are in part calculated to force GM's stakeholders into a deal.
Meanwhile, Senator Debbie Stabenow of Michigan, where most of the US motor industry is located, said late last week the US Treasury Department is preparing a bankruptcy filing for Chrysler. "They are preparing all options," Stabenow said in Washington.
Time is dwindling for Chrysler to reorganise outside of bankruptcy. It has until Thursday to seal an alliance with Fiat, get its banks to agree to cut its debt and reach agreements with the United Auto Workers and Canadian Auto Workers unions on labour cost reductions.
President Barack Obama and officials from his administration's vehicle industry task force have spoken of their commitment to sustaining the US domestic car industry. However, some restructuring experts believe a Chapter 11 filing by GM and possibly Chrysler is unavoidable and chances are that the days of US automotive supremacy are over.
