What nobody in the US seems prepared to say is that Chrysler and GM are failures and need to be allowed to file for bankruptcy, writes JAMES DORAN

WHEN GENERAL Motors and Chrysler first went cap in hand to the US government back in November for $25 billion (€19.7 billion) of bailout cash, the heads of the struggling carmakers promised to come back before the end of March with a detailed business plan.

True to their word, back they came earlier this week, but the business plan was not exactly what their political paymasters were expecting. They did not, as was perhaps expected by some, bring along the blueprints for some new fuel-efficient smart vehicle that US drivers actually want and could afford to buy.

Nor did they provide a line-by-line analysis of where they had gone horribly wrong over the past three decades and how they intended to fix their terrible mistakes.

No, the chief executives of two of America’s once “Big Three” carmakers came with a much simpler business plan. One that has been tried and tested by their industry many times.

They brought a simple request for more taxpayers’ money – $14 billion more to be precise, taking the total scrounged off the state so far to a massive $39 billion and counting.

Without the extra cash, they said, managing to keep straight faces, the companies would fail, rendering the $25 billion already handed over completely worthless.

You have to admit, their logic is flawless. To be fair, the plans were a bit more detailed than that, but not much.

Along with the plea for more cash came another round of job cuts. General Motors (GM) said it would cut 47,000 more of its 244,000 workers worldwide; close five more plants in North America, leaving it with 33; and cut its line-up of brands in half, to just four: Chevrolet, Cadillac, GMC and Buick.

The famed Pontiac brand looks destined for the scrap heap and the company also said it would phase out its Saturn brand, which it once hoped would build small cars to counter the best of the Japanese brands.

GM is also locked in talks with unions and debt holders about reducing its massive obligations to both in an effort to stem the steady flow of cash out of its coffers while nothing flows in at the other end of the business.

Chrysler, which has already received $4 billion in federal loans, said it would cut about 3,000 jobs and three vehicle models, but would need another $5 billion in cash to keep going.

You may have noticed that only two of the Big Three turned up at this begging session before Congress. Ford, which is suffering a similarly massive drop-off in sales on its home turf, has said it will not take government money and considers itself in fair shape to weather the downturn.

Chrysler is in preliminary talks with Fiat about a tie-up with the Italian carmaker but experts believe such a merger will not do enough to save the US company.

There is talk among analysts, such as Brian Johnson from Barclays Capital, that Chrysler and GM might consider getting together in an effort to take capacity out of the industry and renegotiate terms with unions.

What nobody in the US seems prepared to say, however, is that these two car companies are failures and need to be allowed to file for bankruptcy, like any other failed company.

They have not hit a bump in the road and their problems cannot all be laid at the door of the unions or the car-buying public or the low-cost Asian manufacturers.

Chrysler and GM are not two parts of the Big Three; they are two of the weakest manufacturers of cars in a global sector of at least a dozen strong players.

If Ford were allowed to remain as the strong US car manufacturer to compete alongside the likes of Toyota, Honda and BMW, then perhaps the US car sector might stand a chance of survival.

If GM were allowed to go into Chapter 11, it could downsize rapidly, renegotiate contracts with unions and suppliers with ease, and set new terms with bondholders.

Chrysler, meanwhile, cannot survive alone and should either do a deal or shut up shop.

But there is a consensus view in the US that carmakers cannot go bankrupt, as consumers will not buy a car from a company they fear may not be around to fulfil its warrantee obligations or to make spare parts.

This excuse is weak at best.

GM added that it would need $100 billion of debtor-in-possession financing to see it through Chapter 11, while Chrysler claims it would need $25 billion.

This defence is meaningless as it seems the US taxpayer will be required to stump up just as much to see the companies get on the road to recovery.

The US government has until March 31st to consider the new pleas for cash from GM and Chrysler. If it complies, expect the carmakers to be back in July or August with a request for $15 billion more.

If US treasury secretary Tim Geithner does the right thing and declines, we will almost certainly see a bankruptcy filing from both companies and then, perhaps, the once unbeatable American car industry will begin its long and slow recovery drive.