As a result of the U.S. credit crisis – and the near-shutdown of the commercial lending market – investors can expect Corporate American landscape to change in a big way over the next 12 months.

Although bank-to-bank loan rates fell for the sixth-straight day yesterday (Monday) – decreasing fears that the corporate-lending market was going to seize up – a new reality has emerged: As the song says, “only the strong will survive.”

Strong companies will navigate the uncertainties of the markets in the months and years go come; weaker players will falter, fall into bankruptcy, and get gobbled up by larger, more-healthy companies.

“This is unequivocally, absolutely, positively” the new reality, says R. Shah Gilani, a retired hedge-fund manager and Money Morning contributing editor who has emerged as a top expert on the global credit crisis. “And the unspoken reasons is that even after the credit crisis has been alleviated, it will not be over.”

If the credit markets continue to improve as they have been over the past week or so, then the more-creditworthy companies should discover that loans are easier to get, and carry a lower interest rate, to boot. As Money Morning has been reporting, the London Interbank Offered Rate (LIBOR) – a benchmark rate for short-term loans – has been dropping. Yesterday, LIBOR for three-month dollar loans fell for the sixth straight day, declining 0.36 percentage points to reach 4.06%.

The recent decline in LIBOR — which establishes lending costs for individuals and for businesses — reflects a growing trust in the financial sector after governments around the world have guaranteed billions of dollars worth in bank debt and have also unveiled plans under which they will buy stakes in weak and foundering banks.

“The general economy was weakening, and that weakening has taken a turn for the worse,” Robert DiClemente, an economist at Citigroup Inc. (C), told The Associated Press. “And any company that was already facing more-challenging business conditions, when they’re confronted by tighter credit, it gives them one less degree of flexibility.”

Take the U.S. auto industry, which is in a power slide and headed for a cliff.

Burning Rubber – and Cash

The No. 1 U.S. automaker, General Motors Corp. (GM), has been burning through more than $1 billion per month, and now wants to buy Chrysler Corp., in order to access the privately held automaker’s cash hoard. But in the current credit environment, raising the financing for the merger of two companies that have been generating billions of dollars in losses and burning through cash like a California wildfire burns through acreage is tantamount to financial alchemy. GM’s initial attempts to secure financing for the controversial merger have been rebuffed, raising new doubts about whether the buyout can be completed without government aid, Reuters reported late yesterday.

“It’s like a Kabuki dance,” a source familiar with the talks told Reuters. “Everybody already knows the outcome. They are going to have to go to the Fed for money.”

 another person familiar with the talks said. “Everyone already knows the outcome. They are going to have to go to the Fed for money.”
GM Chief Operating Officer Frederick A.