If they emerge from their current economic difficulties, GM and Chrysler will be “lesser players on the world stage” according to CNN.

The “sadly shrunken companies” are hard to predict for the short term, but the long term CNN’s auto editor finds easier: Chrysler will be “a bit player in the American market and remain a negligible one overseas.” The editor continues:

“As for General Motors, I fear a worse fate – that of a shrunken giant, an aging athlete with its best years behind it playing out the string.

Human nature tells you how difficult it is for anyone to accept a lesser role in life, no matter the circumstances. GM has already lost its title of world’s largest automaker to Toyota. Now it risks slipping behind more dynamic competitors like Volkswagen and Hyundai.

Once it is no longer one of the biggest, GM will no longer have a claim at being the best. The brightest talent will look elsewhere for jobs; suppliers will take their new ideas to companies that are growing, not shrinking; top dealers will accelerate their divestment of GM franchises.

As it becomes smaller, GM will lose the advantages of scale. The car business is a volume business; your cost per unit goes down as your volume goes up. Plants run more efficiently, investments can be spread over a larger cost base and parts cost less. Toyota is a master of using volume to its advantage, which explains its standing in the industry.

GM will also no longer be able to afford the investments in new technology that will be essential to the automotive future. With its vast resources, the automaker used to be able to afford to dabble in a number of alternative fuel strategies – battery, ethanol, hybrid, fuel cell. It wasn’t a leader but it could keep pace by spreading its bets over the whole field.

But a smaller GM will have to make choices and focus its resources – something it isn’t used to doing. The cost will be higher and the chances of failure greater.

It was good to be the king and it is going to be very difficult to adjust to becoming just another prince. One of the sources of GM’s difficulties even before the current crisis was its inability to scale its overhead and its aspirations to its reduced circumstances.

Now, assuming that GM makes it through to 2012 when it says it will be profitable again with government help, it will have to find a whole new way of looking at the world.

That may be the hardest job of all.”