GM bankruptcy could be disaster for Indiana

If General Motors Corp. were to collapse into bankruptcy, Indiana would be clobbered, says Indiana Manufacturers Association President Pat Kiely.

Credit markets already roiled by the financial crisis would be unlikely to extend the bridge financing GM would need to survive a restructuring, Kiely said, and most consumers would be unwilling to buy the cars.

GM would stop paying suppliers, who then would lack capital to continue supplying Ford Motor Co. and Chrysler LLC. In addition to taking down Ford and Chrysler, the ripple effect would wipe out dealers and thousands of Hoosier workers.

“This is not [just] a GM issue,” said Kiely, who represented GM-dependent Anderson in the Indiana House during the Rust Belt recessions of the early 1980s.

The Detroit automaker maintains that bankruptcy isn’t an option even while it predicts it will run out of cash before the end of the year. President Bush has shown little interest in bailing out GM – or Ford Motor Co. or Chrysler LLC.

President-elect Barack Obama, who reportedly has urged Bush to throw the Detroit 3 a lifeline, won’t be sworn in until mid-January.

Opponents of a bailout say the money in effect would go down a rat hole because the same executives who guided the companies into their woes would have no better idea of how to turn them around.

No one knows the extent to which Indiana still relies on the Detroit automakers, Kiely said.

Thirty years ago, at least a third of the state’s manufacturing jobs likely were directly or indirectly tied to Detroit, he said.

Now that the companies have spun off functions ranging from trucking to security, direct employment is much lower. However, the functions are still carried out in the state, but by different companies.

Indiana would not be hit as hard as Michigan and Ohio, because Japanese automakers Toyota, Subaru and Honda all have plants, along with their own supplier base, in the state, Kiely said.

If the national economy were strong, the nation and possibly even Indiana might be able to weather a GM bankruptcy, he said. But probably not now.

“We’re in an extraordinary period,” Kiely said. “There are no black-and-white answers.”