For a couple of years now I’ve contributed car reviews to The Truth About Cars. But I’ve never penned one of that site’s signature “General Motors Death Watch” or “Ford Death Watch” pieces, partly because I felt (or at least hoped) that the domestic manufacturers would muddle through without declaring bankruptcy…somehow.

This now appears unlikely. General Motors and Ford were already struggling when both SUV sales and the economy were fairly strong. When truck sales took a hit this year, their revenue plunged. Looking at just the second quarter, GM’s revenue in North America fell from $29.7 billion in 2007 to $19.8 billion in 2008. A gain of about two billion outside North America only partially compensated.

Yes, both General Motors and Ford have more efficient, better-designed cars coming. And GM also has the serial hybrid Chevrolet Volt on the way. But even if these sell well, they won’t be nearly as profitable as the SUVs were. GM will probably lose money on every Volt sold for at least the first few years.

Even if GM could somehow adjust its cost structure to such a drop in revenue, and larger drop is now clearly coming given the financial crisis, and not just in North America. The credit rating agencies recognize this, and have placed GM on “credit watch,” with yet another credit rating downgrade likely. In reaction, the price of GM stock has fallen below $5, it’s lowest point since the 1929 market crash. 

Ford is in similar shape, and its stock has fallen to $2, its lowest point since the early 1980s.

Now, this does not mean that General Motors and Ford are going away. Instead, they’ll likely use bankruptcy to restructure their debt and rewrite contacts with creditors, suppliers, and the unions. In a few years they’d emerge from the bankruptcy process as smaller, hopefully leaner companies.

What does this mean for you? If you own stock in one of these companies, you’ll likely lose your investment. If you own part of their debt, you’ll likely lose part of your investment.

And if you own one of their cars, the resale value might suffer for as long as they’re in the bankruptcy process. Resale values would suffer most if the car’s brand is discontinued. With GM, Chevrolet and Cadillac will certainly survive, while with Ford neither the Ford brand nor Lincoln is likely to go away.

One common misconception: that warranties on their cars would not be honored if General Motors or Ford declared bankruptcy. Unless these companies simply folded up shop and went away–which would make no sense–then warranties will continue to be honored. Since this is a key reason resale values would suffer, then that also doesn’t make sense. But it would happen anyway.