The reality for the global car industry should now be apparent to anyone looking at it: the last thing the US needs is for the car industry to implode.

Sure, like the subprime mess, the car industry’s problems in the US are of its own making. But in Japan, Europe and other areas of the industry, it’s all about the credit crunch which is hurting industries, companies and jobs, regardless of its global location.

In fact, if the US wants to get to 10%-plus unemployment, just refuse any assistance to the flailing General Motors and its domestic mates. Yes, the car companies are lobbying hard for help, along with their mates in US business, unions and Congress. But having seen Lehman Brothers fail and almost take the world’s financial markets with it (helped by the US confusion over the bailout package), does anyone really want to risk going to the edge once again?

GM, Ford, Chrysler and all their suppliers (and don’t forget media and advertising companies, plus tech groups) are carrying huge debts, there are tens of billions of dollars involved, and there are tens of billions of dollars in credit default swaps written on these debts. After the losses on Lehman Brothers (90 cents in the dollar in some cases), corporate debt is already weak and unwanted by US and global investors.

Bloomberg said a forecast compiled for it by a forecasting group called HIS Global Insight had forecast huge losses. Bloomberg said the forecast had shown that GM failure “would cost the government as much as $US200 billion should the biggest U.S. automaker be forced to liquidate … “

The projected expense of $US100 billion to $US200 billion covers funds for existing programs, such as unemployment insurance, and new measures that would be needed to revive economic growth after millions of auto-related job losses.

The failure of GM would drag its suppliers and the other car companies into the hole with it; corporate debt markets would be crunched and shutdown, and no amount of priming by the Fed (as it is doing with the asset backed commercial paper market at the moment) would re-open it for a long time. Recession would beget depression in that case because car companies in Europe, Japan and elsewhere would fail, or face strains, as would companies in other industries.

And if anyone doubts that, why did GM’s subsidiary in Germany, Adam Opel, approach the German Government looking for financial guarantees to keep its factories open in event of its parent failing? As a result of that approach, German Chancellor Angela Merkel has invited leaders from automaker Opel to talks to discuss the company’s financial status.

On Friday, the car company requested credit guarantees from the government, saying it wants the guarantees to counter a downturn in car orders. However, the unit of General Motors Corp, which itself is seeking a US government bailout, said it was facing no liquidity problems.

“It is important that we consult about the proper steps to take so we can try to support the automobile industry,” Merkel was reported as saying on the sidelines of the global financial summit in Washington.

They’re a cautious bunch in the German branch of the GM empire. Has the local arm here in Australia at Holden sought a similar assurance from the Rudd Government? Has the Rudd Government yet bothered to ask what happens to Holden’s operations if the parent goes into bankruptcy?

The GM managers in Germany know there’s a trainwreck somewhere down the line after new car sales in Europe slumped 14.5% in October, the sixth consecutive monthly fall.

The European automakers association ACEA announced at the weekend that the falls had taken the drop in car sales over the 10 months to October to 5.4%: in the US car sales plunged 32% in October and were down 15% over the 10 month period.