It was to be expected; the management at General Motors is left with no choice but to live up to its fiduciary responsibilities and take action to protect the company. With the collapse of the $14 billion bailout bill in the Senate Thursday evening, GM needed to take the next logical if extremely painful steps and consult outside counsel to evaluate bankruptcy.

Related news will begin to snowball — we’re already seeing the effect in American financial industry news.
 
GM hires bankruptcy advisers
Law firm Weil Gotshal & Manges has been retained, and restructuring experts have been consulted after the short-term, bridge-loan “bailout” package failed in the Senate Thursday evening. GM continues to maintain that bankruptcy is not a viable option; a majority of Americans surveyed have said that bankruptcy would negatively impact their choice of vehicles when making a purchase.

Fitch: 7 U.S. auto parts suppliers on negative watch
American Axle, ArvinMeritor, Hayes-Lemmerz, Johnson Controls, Tenneco, TRW and Visteon have been put on a negative rating watch as they are the most exposed in the event of a GM bankruptcy.

Chrysler asked by ‘rogue suppliers’ for cash on bankruptcy risk
A number of suppliers have begun to ask Chrysler for advanced payments and cash on delivery. While the firm characterizes these suppliers as “rogue,” many of them are also experiencing the same credit crunch as Chrysler and may be in need of cash to pay their own suppliers.

Nikkei tumbles as auto bailout talks fail in Senate
The rest of the Asian financial markets also fell hard, the Shanghai composite down 1.7 percent and Hang Seng down 6 percent. Stock prices of Japanese automakers have taken a beating, with Honda falling 10 percent and Toyota Motor giving up 8.3 percent Friday. The Asian markets apparently realize how interconnected the supply chain is between Japanese and American automakers. European and American markets are also likely to open strongly lower.

(Disclosure: members of the author’s family are employed by vendors to the Big Three.)