General Motors takes the cake in the early weeks of 2009, leading the way for what analysts declare to be a very painful year for sellers and buyers alike.

Combined, General Motors and Chrysler are asking for $21.6 billion dollars for a bailout. GM reports that it will not only be cutting 47,000 jobs this year, but for now, plans are in the works to phase out its Hummer, Pontiac, Saab, and Saturn brands. GM will be phasing out Saturn by 2011, according to the Wall Street Journal, or 2012, according to the New York Times. This initiative strips the once automotive giant down to four brands: Chevrolet, Cadillac, Buick and GMC.

Chrysler is lightening its load but still seems, at least relative to GM, to be sticking by the tagline for its Dodge brand that, ironically, embodies the mentality that likely got this member of the domestic “Big Three” into trouble — “bigger is better.”

According to reports by the WSJ, the company’s plans for survival isn’t very convincing, if only because it doesn’t seem nearly drastic enough.

In addition to requests for an additional $5 billion, on top of the $4 billion it has already received, Chrysler plans to make some production changes, including initiative to:

“…reduce its manufacturing capacity by 100,000 vehicles a year, that wouldn’t be significant in light of its production capacity of 2.5 million vehicles at its 12 assembly plants in North America. The projections imply it is on track to sell slightly more than one million vehicles in the U.S. this year.

Chrysler vowed to launch 24 new vehicles in the next 48 months, but it’s unclear what new vehicles Chrysler has in its pipeline. Several engineers who have left the company said they departed because they were concerned about cutbacks in development of new models. Suppliers working with Chrysler have also said they have halted or significantly slowed work on future Chrysler vehicles.

Kimberly Rodriguez, an auto consultant at Grant Thornton LLP, said she found Chrysler’s plan underwhelming. ‘There just has to be more. They really have to call out the final solution. They have bitten around the corners.’ The Fiat alliance, she added, ‘is not going to be enough’ to ensure Chrysler’s survival.”

In a conversation I had with William Pollock, a principal analyst at Aberdeen Group, about software solutions, there was something he said that certainly resonates with the auto companies, and actually, with any company that’s slow, or reluctant, to adapt to the (very rapidly) changing times. In other words, there’s a mentality companies should be thinking about all the time, rather than waiting for a crisis (e.g., a recession), only to find out that it’s too late:

“[There] are two ways to look at [established companies in the industry],” Pollock says. “They are either a pioneer (i.e., if it wasn’t for them, then the key players in today’s market would never have even been created), or they’re a…dinosaur. And, there’s a fine line between being a pioneer or a dinosaur in the eyes of the market.” Pollock continues to emphasize that in order to avoid market recognition as a dinosaur, companies need to be constantly and continuously re-engineering themselves. “You need to raise the bar to…meet today’s customers’ needs,” which he recognizes will inevitably raise the customer’s expectations.

You can  choose look at it as a vicious cycle or, dare I say it, an exciting adventure.

James Surowiecki recently published an article in in February 9th issue of The New Yorker entitled “Hazardous Materials.” In the piece, he relates the concept of moral hazard as a potential impetus for people/companies to make big/risky investments with little care for the consequences because they’re either insulated or believe that on some level, they will be saved.

Although Surowiecki applies this mentality to the financial institutions, the “dangers of moral hazard” definitely apply to the auto manufacturers. If GM and Chrysler get the money it needs to stay in business, will they really start manufacturing more modestly-sized, eco-friendly, gas-conserving, and, oh yes, high-quality driving machines? Or will it continue to sneak by with its over-sized, prized posessions, selling them at a higher price point to make up for an already diminished buying market? And what about the taxpayer who will be funding this bailout? If he/she doesn’t have the money to buy the car — big or small — will any amount of saving/bailing out matter?