The key word of Barack Obama's election campaign was 'change'. And that's what GM and Chrysler are about to experience - big style. Mark Bursa assesses the prospects for what's left of the US auto industry.

He's only been in the job for a few weeks, but US President Barack Obama is proving himself to be a more decisive decision-maker than the boards of either General Motors or Chrysler.

Sacking Rick Wagoner is only the start of what is expected to be a much more radical shake-up of America's crippled car makers. Obama summarily rejected the GM and Chrysler restructuring plans, and his carefully chosen words have paved the way for what some analysts - including this one - believe is the only solution for GM: Bankruptcy.

Rather, it's the start of the solution. Only through Chapter 11 can GM get rid of the crippling healthcare and retiree benefits that have played such a huge role in bringing the company to its knees. And to solve this, Obama has looked to repeat the trick he's used with the banks - isolate the toxic debts from the sound core of the business.

Under the projected scenario, the healthcare and retiree benefits are treated as the GM equivalent of the banks' bad mortgages. What is being proposed is a so-called "quick rinse" bankruptcy, under which GM goes into Chapter 11, and a core business centred around Chevrolet and Cadillac is swiftly bought back out of receivership - probably on the same day. Or as Obama put it: "Using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger."

This would be achieved by using a specific part of the Bankruptcy laws knows as Section 363, which would allow creditors, including bondholders and even the UAW, to take a stake in the new, slimmed-down "Good GM" through some form of debt-for-equity swap. The rest of the company - including unwanted brands such as Hummer, Pontiac and Saturn - would remain in administration.

This "Bad GM" would take on most of the billions of dollars in debts, and administrators would seek a piecemeal sell-off of assets, with the proceeds being used to pay back the creditors of the old company. A similar deal would be set up for Chrysler, allowing Fiat, the preferred partner, to buy "Good Chrysler", while leaving the bad debts in a Chapter 11-protected "Bad Chrysler".

It looks a neat solution - but will it work? The Government has agreed to back any warranties on GM or Chrysler cars - removing the fear that customers would not buy from a bankrupt company. But there is still a problem.

Toward the end of his speech, we were reminded that Obama is a politician, not a businessman. "I want every American to know that the path I am laying out today is our best chance to make sure the cars of the future are built where they've always been built - in Detroit and across the Midwest," he said.

The intention, he continued, is "to make America's auto industry in the 21st century what it was in the 20th century - unsurpassed around the world". Well, you have to go a long way back into the 20th century to find a time when that was the case - the 1950s, when booming post-war wealth and low gas prices resulted in bigger and more opulent cars.

It didn't last. Those big cars were out of sync with the rest of the world - an issue that's still felt today. America's auto industry was surpassed by those of Germany and Japan, vanquished in World War 2, but able to rebuild without the über-powerful US unions.

Obama is dangerously close to protectionism here - and he needs to be careful. The sheer fact that GM has survived at all springs largely from the fact that it isn't totally reliant on Detroit. Some of the most profitable cars GM sells in the US - large parts of the Chevrolet range - are built in Mexico, or Korea.

And a large part of the company's future is linked to its ability to operate in the Emerging Markets. This is Rick Wagoner's legacy - history will show that his two key decisions were the acquisition of Daewoo Motor and the intense focus on building up operations in China, Brazil and Russia. GM has a presence in all the BRIC markets, and in most cases, the cars it sells there are the ones it develops in Korea - Chevrolet Matiz and Aveo, plus the new Cruze.

Logic dictates that if "Good GM" is to survive it needs to maintain these operations, not just as an outpost, but as part of the very core of the business. Obama's people talk of taking a "clean sheet of paper" approach. OK, let's help them out.

What if the centre of gravity of "Good GM" wasn't in Detroit? After all, development of all the company's A, B and C-sector cars, plus compact SUVs and MPVs, takes place in Korea. All that's developed in the US are large, North American sedans like the Malibu, along with the big dinosaur SUVs and pick-ups, vehicles that are about to be wiped out by the recession meteorite.

Under this scenario, how much manufacturing is desirable in the US? Not a lot. Cars can be sourced from Korea for a much lower factory gate price - which means more profits. In the future, China could also be a source point as quality improves. Is "Good GM" as much an Asian business as an American one?

To survive in the US, focusing on Chevrolet and Cadillac makes sense - but what to do with Buick and GMC? It's not clear whether they are still in the "Good GM" or the "Bad GM" camp. Keeping them going means maintaining a second dealer network, selling Buicks to a dwindling audience, and offering GMC SUVs and pick-ups that are largely identical to Chevy models.

Like Chrysler, GM only needs a single franchise package - Chevy-Cadillac, which would compete head-on with Ford-Lincoln, Toyota-Lexus and Honda-Acura. Sure, you might lose some of those Buick and GMC buyers - but for too long GM has been overly concerned with maintaining market share at the expense of profit. And in a market that is 40 percent down, now is as good a time as any to shed brands and prepare for the future.

There's a hint that Obama at least recognises the brand problem. In his speech he said GM's managers "must ask themselves have they consolidated enough unprofitable brands?" Trouble is, eliminating brands means eliminating US factories and US dealers. The factories can be shunted into "Bad GM", but getting rid of dealers is especially costly - paying up retailer contracts accounted for much of the estimated $1 billion it took to shut Oldsmobile a decade ago. Of course, bankruptcy makes this easier to achieve, and cheaper.

The clock is ticking - Obama has given new GM boss Fritz Henderson just 60 days to sort the mess out. Henderson is a GM veteran who has served in many of GM's emerging markets operations as well as in Detroit, so he can see the big picture. And he has a hard-man reputation, so perhaps Obama will encourage him to make the tough decisions.

Over at Chrysler, bosses have been given half that time - a mere 30 days - to come to a deal with Fiat. This had looked a done deal, but now it seems less certain. Is it possible that Fiat CEO Sergio Marchionne might be eyeing up other opportunities? Turmoil at PSA has led to the removal of Christian Streiff - is Marchionne keen on expanding the already strong ties between the two firms?

And what about Opel, so nearly Fiat's owner just a few years ago. There are existing links - diesel engines, for example. Access to big car platforms and German quality must have some appeal. And could the up-for-grabs Saturn network, which sells an Opel-developed range, provide Fiat with a cheaper and less risky US entry strategy than Chrysler?

Marchionne sees massive consolidation, and he wants to be on one of the winning teams. As opportunities present themselves, it'll be a tough call to decide which acquisitions or mergers make sense. If Marchionne does walk away from Chrysler, bankruptcy will surely beckon. Obama made this clear: "If they and their stakeholders are unable to reach an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollars to keep Chrysler in business."

Someone would probably buy Jeep, and the ENVI environmental division has some good new technology, but you fear the Chrysler and Dodge brands would go the way of Plymouth or Oldsmobile. We'll find out in a month. Like the man says, change is gonna come.
Mark 'Coolbear' Bursa