Aug. 12--TRAVERSE CITY -- Whenever the B-word -- bankruptcy -- is uttered in conversation about the Detroit Three automakers, there is a quick and predictable retort.

"Bankruptcy is not an option," says CEO of Auto Company X, Y or Z, "because we sell a consumer product, and people won't buy cars if they don't think we'll be around to service them or supply replacement parts."

That's a legitimate concern. But a more persuasive reason to believe that General Motors Corp., Ford Motor Co. and Chrysler LLC will avert Chapter 11 bankruptcy is the fallout that would decimate its component suppliers and spread chaos throughout the U.S. industrial base.

Think of it as nuclear winter.

That may sound stark, but the prospect of an auto industry meltdown is actually a fairly routine topic of conversation this week among the more than 1,000 people attending the 2008 Management Briefing Seminars in Traverse City, presented by the Center for Automotive Research. That kind of talk is what happens when Ford reports an $8.7-billion, second-quarter loss, only to be dwarfed by GM's $15.5-billion stinker in the same period.

Think about the catastrophic impact on metro Detroit if GM, or Ford, or even the smaller Chrysler stopped paying for steel, for rivets and radios, for tires and toilet paper. We're talking billions and billions of dollars.

Within 90 or 120 days, vehicle output would grind to a halt. Auto suppliers are operating on a shoestring. They have no surplus cash, no safety net that would allow them to keep supplying a bankrupt automaker if they don't get paid.

"The impact would spread like wildfire across the whole economy," said David Cole, chairman of CAR.

That's why, no matter how much the big shots on Wall Street and in Washington, D.C., belittle Detroit's auto companies, they will bail Detroit out if they must -- just as financial basket cases Bear Stearns, Fannie Mae and Freddie Mac have recently been propped up by government intervention.

No one likes to use the other B-word -- bailout -- when talking about the auto industry. GM, Ford and Chrysler are asking for assistance in a more euphemistic phrase, seeking help with "access to capital," perhaps as much as $40 billion to get through the next few years. In today's world of slumping sales and volatile gas prices, each company faces great difficulty in finding the huge sums necessary to shift its product mix from big trucks to small cars. Since their credit ratings are all abysmal, further borrowing -- if possible at all -- would be prohibitively expensive for the Detroit Three.

Thus their message to Washington that they may need help with "access to capital." Translation: low-cost loans, assisted by either rate subsidies or loan payback guarantees.

Yes, many lawmakers and free-market purists will yelp and squeal that Detroit's management and labor unions have created their own catastrophe and don't deserve a rescue. But the fallout from a major auto company failure is too grim to contemplate.

"It's scary for all of us, scary beyond belief," Tim Leuliette, chairman and CEO of Dura Automotive Systems, said in an interview Monday.

"Is management worth the money they're paid? You're going find out in the next six to 12 months," he added. "Managements will make decisions that will make or break companies."

And on that happy note, we can't wait to hear the rest of the buzz at Traverse City this week.

Contact TOM WALSH at 313-223-4430 or twalsh@freepress.com.

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