Chrysler Down, Almost Out

This post first appeared on Minyanville.

It was only a matter of time.

What began months ago with the big 3 automakers -- Ford (F), General Motors (GM) and Chrysler -- begging for federal assistance as car sales dried up and credit markets froze, may soon be slogged out in bankruptcy court.

The Wall Street Journal reports Chrysler LLC is preparing to file for Chapter 11 bankruptcy as early as next week. The company's fate has been hanging in the balance since the Obama Administration ousted General Motors CEO Rick Waggoner last month and told Chrysler it had precious little time to merge with Fiat or find some other way to remain solvent.

Now, it appears, time has run out.

According to the Journal, the bankruptcy plans will be put in place irrespective of whether the embattled car company can come to terms with lenders or get Fiat to swoop in for the rescue. Ultimately, the resolution may involve bankruptcy as to wipe out certain debt and give Fiat the opportunity to sort through its various operations and pick the ones it wants.

Notably, the United Auto Workers union appears to support the plan, as it would end up owning a chunk of a rejiggered Chrysler.

And now that the US government is so intensely involved in managing the affairs of the Auburn Hills-based company, any Chrysler bankruptcy filing will ultimately have the stamp of approval of President Obama and his Treasury Department minions.

According to Bloomberg, in a statement issued after Michigan's Congressional contingent met with Obama's closest advisors, the group said "The administration and the companies must continue to prepare contingency plans to avoid liquidation or a protracted restructuring process."

We have entered an era in which corporations are terrified of going anywhere near our nation's capital. Even as the federal government doles out hundreds of billions of dollars, the strings attached are simply too strangulating for the money to be truly attractive.

Just look at Bank of America (BAC) CEO Ken Lewis, now embroiled in a fierce battle over details of the Merrill Lynch takeover: All that cozying up to Washington to support that lousy Countrywide purchase doesn't seem like such a great idea now, does it?