Bailout report: Shaking out Chrysler

• Bye-bye Chrysler passenger cars
• Bye-bye Dodge Truck
• Bis morgen Minivan
• A new mission for Jeep

GM and GMAC have received between them enough of the magic liquid to sustain GM until March, whereupon it will have to prove that it is truly committed to the radical surgery necessary to save itself. The $13.4 billion (plus $6b for GMAC) is enough, seemingly, to hold GM’s position as it makes the tough deals with labor, dealers and bondholders that are imperative to its survival.

But let’s face it, $4 billion for Chrysler is just about enough to wind things up in Auburn Hills. Nardelli has said as much in his grovels, and Chrysler has no hope of ever being a global company, which is going to be the key to salvaging the North American industry. So what’s going to happen? Here’s my take:

Chrysler, LLC declares bankruptcy – stop kidding yourself, you know it’s the first best choice for amputating excess industry capacity. But is there anything to salvage? No and yes. Chrysler, LLC is in possession of five meaningful brands, Chrysler passenger cars, Dodge passenger cars, Dodge Trucks, the minivan, and Jeep.

First of all, Chrysler and Dodge passenger cars cease production, and that asset loss is the grounds for a “structured” bankruptcy, wherein the Federal funds and whatever else is rattling around in Chrysler’s piggybank are used to give salaried and hourly workers some kind of “buyout,” to pay suppliers most of the money they are owed, while Cerberus gets a chunk of newly-issued stock in a new entity, explained below.

Dodge Truck also ceases production. Forget about an Indian or Chinese company buying it. Toyota and Nissan can tell them that the North American light truck market is a lot tougher scrum than they ever imagined (ask Cerberus, too). So, as fine as the new Ram pickup is, the light truck market is so overstocked with good products that the competitors might call a truce, take a collective breath and duck the next product cycle.

Volkswagen already has a piece of the Chrysler minivan, and maybe takes the whole ball of wax for a billion or so more mop-up money. If they can keep the price down, Volkswagen gets a competitive platform in a reliable high-volume segment, and closes in on becoming a real mainstream U.S. competitor. The minivan market becomes an exclusive Honda-Toyota-VW playground. And with the way things look in terms of the VW-Porsche tie-up, we will no doubt see a Porsche minivan by 2012.

That leaves Jeep. Who gets that prize? Furriners need not apply for this totem of American greatness. Jeep lands under the GM umbrella (dump Hummer), and Cerberus and the Fed end up with GMJ stock. Ford won’t bite because Alan Mullaly is too smart to distract Ford from its current plan, which seems to be functioning. And believe it or not, within the GM orbit, Jeep will serve as the key element in achieving the drastic change that is necessary for GM’s long-term survival.

No Way? Way. The key for GM is to not cast Jeep into the stew from which the General is trying to extract whatever of its brands are still identifiable. Instead, GM leaves Jeep to function as an autonomous division, continuing to design and develop its own platforms down in the old Detroit Nash-Kelvinator plant, where Chrysler has had the good sense to leave it be since absorbing it from AMC in 1987. Strategically, Jeep becomes the fulcrum of GM’s long-term strategy for success as the pathbreaker for GM’s return to the decentralized operating structure that made it the most dynamic company in the world for decades.

So there you go.