GFC, Side Impact Protection

The Obama administration is playing hardball with General Motors and Chrysler, threatening to push them into bankruptcy if they don’t come up with more aggressive restructuring plans in a matter of weeks.

This hard-line approach, including the ouster of General Motors chief executive G. Richard Wagoner won’t solve a fundamental problem facing Detroit. People just don’t feel like buying new cars.

Until buyers return to dealer showrooms, it doesn’t matter how much further GM shrinks, or whether Chrysler strikes a deal with Italy’s Fiat. “No car company is viable at today’s sales volume,” says Jeremy Anwyl, chief executive of Edmunds.com, an automotive research firm.

Obama acknowledged Monday that Detroit’s problems are due in large part to weakness in the economy, and he pledged to accelerate efforts to prop up auto sales, like speeding up the purchase of government fleet cars and working to free up consumer credit through previously announced initiatives.