Chrysler's bankruptcy could well set the stage for a similar filing by General Motors.

While GM has another month to sort out its affairs, obdurate unions and debt holders could scupper its restructuring plans.

Midweek, both the government and Chrysler CEO Bob Nardelli had been arguing that the company's negotiations with debt holders and unions were going well.

But just hours later, we learned that President Obama would be announcing the company's bankruptcy.

Chrysler filed for Chapter 11 bankruptcy protection in New York on Thursday. The decision was forced by a number of debt holders who were reportedly holding out for better deals.

Obama said the bankruptcy would be "surgical," lasting up to 60 days, and that the government would provide some $8 billion in additional aid.

At the same time, the process would involve the completion of the reported alliance with Fiat.

And while GM scrambles to restructure itself with factory closures and temporary shutdowns, it could also be forced to enter bankruptcy if its unions and debt holders refuse to compromise.

Certainly the next few weeks will reveal just how hard headed the government plans to be with the creditors at Chrysler who had been holding out. And maybe they will come to the table rather than give the government the upper hand following bankruptcy. Or maybe not.

Indeed, it may already be too late. GM's problems are so immense and while it has taken drastic steps to restructure, the president's Automotive Task Force may already be planning its bankruptcy so it can sort the affairs out with a strong hand.

And Fiat could again play a role as it is reportedly interested in acquiring a stake in GM Europe which includes Opel in Germany and Vauxhall in Britain.

As I have mentioned before, it is remarkable how nimble Fiat is proving to be in circling these troubled companies and carving out deals that could substantially strengthen the Italian auto maker's global reach.

- Peter C.T. Elsworth