Let's play a game of "Let's Pretend" for a few moments here; let's pretend there isn't a heated debate going on as to whether or not any or all of the Big 3 Auto manufacturers should be bailed out. Let's pretend the economy doesn't totally suck, or at least it doesn't suck for you. Regardless of your REAL circumstances or intentions let's pretend you've made up your mind to buy a new vehicle. Despite your personal tastes or opinions or needs, let's pretend your preference is for a particular brand of vehicle and that the company that makes it has filed for Chapter 11 bankruptcy.
Would you still buy that vehicle?
There have been various commentators and politicians on different programs saying there wouldn't be any problem with GM, for example, filing for Chapter 11 to give them the opportunity to reorganize and rebuild. Some have cited the airlines, I think Delta was one mentioned, and have said that people continued to fly on these airlines that were operating under Chapter 11 and that they managed to come out of bankruptcy stronger than ever.
Do you consider that to be a good comparison? For me, if I'm going to book a flight I'll have several factors to consider before choosing an airline - of course, the airline's safety record will be important, as will their fares and, obviously, the availability of flights to fit my schedule. Since I have some frequent flier points with several different airlines, that will also be a factor. Now, if I'm going to make the much larger purchase of a new vehicle there will be other things to consider such as will I be able to get parts in a year or so, will there be a place I can take it for repairs if needed and will my warranty be any good if something goes wrong.
What about you? Do you think there's as good a chance an automobile company such as GM will be able to survive Chapter 11 as there was for an airline? I don't think so.
Annie
[question posted by anniepa]responses and comments:
hi anniepa! i am not familiar with chapter 11 because i am not from the united states. but whatever it is, i don't think there is anything wrong with buying stuff, a car or others, from a company that is going bankrupt. here in our country, some companies sell their stuff secondhand especially if they are closing. and you can get good stuff for less. so i think there is nothing wrong. it is actually helping the owner recoup some of its losses. take care and God bless you! merry christmas! [spoiled311]
It's one thing to buy things from a store that's going out of business or a company that makes clothing, but a car is a bit different in my opinion. If the company ceases to exist eventually you may not be able to get parts for the car. Also, if the company goes under who's going to honor your warranty if something goes seriously wrong with it before it's even paid off? These are things I'd worry about and really need to be reassured I wouldn't be left out in the cold. Annie [anniepa]
I certainly would by the car as it would be a bargin for me. It would help the owner also out and make him a few dollars also. I think a lot of companies are going to go bust this new year, especially the bigger ones and certainly the car buisness. It is all very sad though and I will pray for everyone. [hildas]
Car parts must be available for ten years beyond the manufacture date of the automobile. If a company goes out of business, there MUST be a provision to make parts for that vehicle for ten years. That provision provides that we will still have parts available when the warranty expires. After ten years we are out of luck. That being said, I would look for a deal on an auto from a maker that was considering Chapter 11 filing. I really don't think our Congress with the deep pockets will turn away the Big 3 for a bailout. I say let them all file for Chapter 11 and then after restructuring and presenting a plan for solvency, we should consider low-interest loans to help them stay in business. Not a bailout.... there MUST be provisions to repay the loans, regardless of how well the Big 3 were doing. In considering a reorganization plan, comparing the Big 3 to Delta or any other services company is like comparing apples to oranges. If the Big 3 produced the best product out there, they wouldn't be in such dire straits now. Unwise and wasteful programs cost the Big 3 untold amounts of money, lets hold them accountable for the decisions they made themselves. Nice to see you again Annie. [DrMario]
When a company goes bankrupt, it doesn't go out of business, that's the key. [peavey]
At this point it really doesn't matter anymore as to how the customer perceives them. Whether they declare bankruptcy or go begging for money to the government, not once but numerous times, lol, ... their credibility is shot. If people buy the car, it's theirs and the banks. They don't owe anything to the manufacturer. The only problem that potentially could occur is if the buyer pre-pays the new car before it is delivered. That money could potentially be part of the bankruptcy proceedings while the customer doesn't get a car, forcing the customer to get in line with all the other creditors and probably get nothing back. At this point however, whether they file for re-organization bankruptcy or go begging for money, people don't know if they'll be there tomorrow, will not file for bankruptcy anyway, despite the financial injection by the government. Either way, the trust is gone. They might as well go through bankruptcy. Now, why don't they want to go through bankruptcy? Well, obviously consumer trust is a fluff argument. It just looks bad on their record. They'll have a hard time getting money, the CEOs etc will have a hard time finding another job after bankrupting a company... things like that. Even more important, bankruptcy re-structuring will apply a scrutiny and scrubbing they don't want. It'll cut away at the upper management jobs, the perks, etc. If they get the money from the government there'll be a few strings attached but they are significantly less and it's easier to get around the rules imposed on them and to 'charm' the controller. Plus no matter where they go they can re-assure their lenders that they are safe to hand money to because they are so big, the government will always hand them money in order for them to survive. All a matter of perspective. [jonesy123]
I don't think chapter 11 is going to enter the situation, there is too much at stake for all of the workers and other businesses that would be affected. However, I drive a Buick LeSabre and love the automobile, and yes it get good gas mileage. This is my 3rd Buick and if they were available when I am ready to buy my next one, I would buy one, even if GM was in chapter 11 bankruptcy. I don't think that the democrats or republicans in Congress will defeat some sort of help for the auto companies. It looks like they will be getting a 15 billion dollar bridge lone. I don't know how this will be divided between the companies, but it will happen. The politicians can't afford to let the companies go under and I don't think they want to take a chance, after all they will be up for re-election one day. As far as parts go for a bankrupt auto company, there are several companies that make "after market" parts so I don't think that would be a problem. As far as the airlines go, how do you know the Tires on a plane are in good shape, maybe they should be replaced. I was in a plane that "ground looped" twice, once while in the Air Force and another time on a trip to New York. In both cases the planes blew a tire on landing. The plane simply spun on the ground and ended up off the runway. It scared the "H" out of the passengers. Maybe we should kick the tires before boarding, but I guess you can't do that today, in fact you don't even see the pilot of the plane before takeoff or inflight. [iriscot]
Oh goody, I haven't played "Let's Pretend" since I was a kid! lol I would still be willing to buy from a company that is under Chapter 11 if I was also able to get an excellent deal in exchange for the warranty that might not be there when it's needed. Having the vehicle repaired and finding parts isn't that difficult, as others have stated, but I would want compensation for the warranty risk I would be taking. [spalladino]
I really don't think I would buy a vehicle from a bankrupt company. My reasoning is that if the company is bankrupt, who knows how much longer they will be in business --thus possibly affecting the warrantly on the vehicle. [bam001]
First of all, let me state that this is my personal opinion, and you have been warned before further reading (no offense). Now about the reply: first off - buying a new car is the most idiotic investment, if you can even call it an investment. If you're living in the rural areas it makes sense, if you live in a city; it's kind of out of place to buy a car since there are ways to go anywhere by using public transportation. If you buy already used car in a good condition that makes sense, but unless you need it for business I don't see a point of buying a new car. What's more, I had one, sold it, and I'm never buying one again, at least not the one that runs on gas. When they start massively producing electric car (already happened once, but pulled out for political reasons), I will, surely, buy one IF I really need it. Otherwise it's just waste of money, space, and time. [neuronic]
Of cource not. I care about who will serve for repair after the sale. I don't want to waste time on these problems. [sunny0806]
I am not sure. I have a friend that did and she looked into the parts thing before buying, it is federal law that parts have to be available for at least 10 years if the company goes out of business, or files bankruptcy. [Thoroughrob]
I think the availability of parts would be a major point plus the fact that this would affect trade in or re-sell value of the automobile. [whiteheather39]
That's another good point about the trade-in or resell value. I have to add no matter what some may say about the availability of parts after a company goes out of business with a lot of today's newer vehicles some repairs and services almost have to be done at a dealership and even if there are other "authorized" places for repairs they may not be within a reasonable distance for some who may have bought their vehicle at a local dealership that no longer exists. Annie [anniepa]
What would concern me is will I be able to get parts? The next concern would be would the warranty still apply, and who is in charge of the finances, and will I be able to get insurance. But what I would worry about was if there was an accident, or if there was something wrong with the car (like the steering wheel falls off at 10,000 miles) would I be able to get it rectified. If these questions are not answered to my satisfaction, I would skip buying the car and buy one from a company that is financially stable. [suspenseful]
Excellent point about something being wrong like the steering wheel falling off. To anyone who may laugh at that idea, there have been many things like that happen to different vehicles due to some defect and there are huge recalls of certain makes and models all the time. There have been vehicles that have caught on fire, there have been brakes that have failed, Wheels that have fallen off, all kinds of things and generally once it happens a time or two to a few unfortunate souls the company looks into it and they notify everyone who owns that particular vehicle to take it into the dealership or an authorized repair shop to be fixed. You're right, I'd definitely need to be guaranteed I wouldn't get stuck in the even something like that were to happen. Annie [anniepa]
The notion that filing for Chapter 11 alone will scare customers away from an auto manufacturer is a red herring. The excuses given that potential buyers won't have confidence that parts will be available, that there will not be a place to bring your car for repairs or the warranty will become suspect or useless are flawed. As DrMario and others have stated, parts must be available for at least 10 years after the vehicle is manufactured. Many mechanics and auto shops already service these vehicles and they don't all disappear overnight if a automobile manufacturer files for bankruptcy. As for warranties, any of the "Detroit Three" can seek an agreement with a third-party to insure their warranty obligations. Personally, I won't be buying a vehicle from GM, Ford or Chrysler, bankruptcy or not. Filing for Chapter 11 would not be the lone reason why I would avoid any particular vehicle manufacturer though. The "Detroit Three" are in desperate need of restructuring and Chapter 11 would help these companies make the difficult decisions necessary to survive. One of the problems is that the management of the "Detroit Three", much like the government that they have come to Washington to beg from, are too reactionary. The CEOs of the "Detroit Three" are so out of touch with the public mood that they were shuttled to the first meeting in Washington in private jets. That doesn't exactly instill confidence that these managers have the wherewithal to steer the ship in troubled waters, does it? Doesn't anyone else find it funny that Ron Gettelfinger continually commented that the UAW workers had previously given many concessions even though the "Detroit Three" still remain unprofitable and are clearly on the verge of collapse. It must be nice to be able to count on a huge taxpayer funded bailout so you can keep your head buried in the sand and attempt to avoid change. [bayernfan]
While I share your sympathy for people who find employment indirectly from the "Detroit Three" automakers and the communities that are affected, I do not feel sorry for the UAW workers. When you ask for unrealistic concessions from your employer, don't be so surprised when your actions put the competitiveness of the company that you work for at risk and it goes under. The UAW workers stand to lose just as much, if not more, from a Chapter 11 filing as management, shareholders or debt holders do. Perhaps that is why the UAW is so against the idea? With jobs, benefits and pensions on the line, I don't understand why the UAW membership doesn't try to do more to help out? Perhaps it is because they believe that the government will be there to backstop the "Detroit Three" no matter what they do? Maybe it's just me, but I see something wrong with asking minimum wage workers, without benefits and pensions, as well as future citizens to subsidize workers making $30 or more an hour. Chapter 11 bankruptcy doesn't mean that the company ceases to exist and it immediately stops operating either. It just provides a protection against current creditors and allows a business the room to restructure. It oftentimes can help a business because new creditors know that they will become first in line, and a good restructuring plan can build confidence in a company. To respond to your comments about polls. While I do not doubt that most Americans would be wary of purchasing a vehicle from a company in Chapter 11 Bankruptcy protection, I am not convinced that those same people would consider the "Detroit Three" products anyways. North Americans have been voting with their feet for years. The "Detroit Three" haven't just started to lose market share. You don't honestly believe that a $15 Billion dollar rescue plan is enough to help the "Detroit Three" for longer than a few months do you? GM has a cash burn rate of $6.9 Billion per quarter: http://www.businessweek.com/lifestyle/content/nov2008/bw2008117_534334.htm Do you really think the $15 bailout is going to put consumer's minds at ease? All of a sudden the worries about the viability of the "Detroit Three" just disappear? At best, the U.S. government is delaying the inevitable and wasting tons of taxpayer dollars. I guess that the economy is going to turn around right away and Americans will find the money/new debt to purchase all those cars stuck on the lots, right? Polls can say anything. They way that questions are asked and the order in which questions are asked is very important. What options were given for any given question? Were follow up questions or explanations allowed? I am sure that the people polled weren't made aware of the possibility of third-party businesses guaranteeing warranties. wink [bayernfan]
i wouldn't buy it. A bankrupt company couldn't supply any after service. Although i can get a vehicle with a low price,it means more likely i would spend more money in the future, if some parts from the vehicle only are made by the company are broken,no substitutes i can find in market. i lost more. [hnumeng]
Yes, why not? But if the price is good... [jess_chris]
I wouldn't buy a vehicle form a company about to disappear.I don't want to have any problems in the future if I need costumer service, or to fix my car or finding parts without having to visit car scraps in the area. [overwings]
I would have no problem buying from a company that went bankrupt. First, they won't go out of business when/if they go bankrupt. That's only a way of getting out from under obligations they can't pay anyway. Secondly, as others have stated, parts have to be available for any vehicle manufactured for 10 years. Thirdly, if the parts are available, there will be mechanics to work on them. Number four: Prices will be lower on these vehicles, at least for awhile. As a matter of fact, it might be the best choice if you're in the market for a new vehicle. [peavey]
Fundamentally Chapter 11 is not always a bad thing. It forces the organization into receivership with outside oversight. No more will the executive be able to pay themselves outrageous fortunes for bad performance, no more will the Unions have a chokehold, no more outsourcing if that makes bad business sense. Creditors get paid. The company continues to operate and generally overtime more profitably as under performing operations are either shut down entirely or sold off. Operations are consolidated and overhead chopped down to manageable size. Contracts are re-negotiated at better terms. Decisions are scrutinized not just by the BoD, but by the externally assigned Receivership Judge. Would I buy a car from a company in Chapter 11? Hades yes, the likelihood of that manufacturer staying in business, improving their business model and maybe even improving their cars is strong. [lvaldean]
haha good question, i am not from the states, so chapter 11 means nothing to me, but we have bankrupsty just like you do and i would consider buying a car from somewhere else, depending on the deal they wanted to offer, just because if anything happened to the car (if it was faulty and they prob knew bout it and didnt bother mentioning it) i wouldnt be able to go anywhere to complain now would i!? [rin888]
A car from a bankrupt car company? No, a big NO. because where can I find a parts for that car if ever it get trouble, the warranty .?. [platinumgold]
I would buy the vehicle as long as I get it after I paid for the wedding party supplies and all the papers in. I will make sure I get everything settled out first. In regards to airlines I don't care for bancruptcy in their part as long as I am safe flying with them. I would also consider the cost of the airfare and if they render to the place I am going to. The automobile company can survive maybe if they find good investors to help them out so they can start advertising and getting known and get more clients in. It really depends on how the economy is settling in. [p3halliwel2005]
i do not know if i would or not. if i could get a really good deal on the vehicle perhaps i would. but then you have to ask yourself who will stand behind the vehicle if something goes wrong? i guess it is a matter of weighing your options just like with any other decision. i always buy american made vehicles so if my purchase would help things that would be a bonus. [mikeysmom]
You're doing your part by buying American made vehicles. That's part of why the American companies are hurting, too many people have been buying foreign cars for decades now but on the other side of the coin Honda and Toyota, for instance, have been making very good and reliable vehicles that get excellent gas mileage for years. Also, many of the vehicles we think of as being "foreign" are actually made in the U.S. and some that have an American name are made in other countries. Annie [anniepa]
If the automobile industry could get the unions and the government regulations off their backs, maybe they could survive; but I'm not sure that's ever going to happen. [bestboy19]
Thank you for your well thought out response but I'm afraid we're going to have to agree to disagree on a lot of what you've written. Unions are far from perfect, the government is far from perfect (especially our current Administration!) but I don't blame the auto trailers business for all of the world's ills. Corporate greed is also to blame for many of our problems and workers need protection from employers who would take advantage of them in every way possible if they could. You're blaming government for the high cost of health care? It couldn't be greedy insurance or pharmaceutical companies, right? I'm all for personal responsibility but there are times when people need a helping hand and a safety net. Annie [anniepa]
I have thought about wah wah pedals myself; at first I thought heck no!.. but then I was sort of wondering what kind of bargains might be out there if the big 3 were to go under if they didn't get the bail out... and I didn't know if it was such a good idea. After reading some of your responses though, one in particular said that parts have to be made available for 10 years... that would be great... and if they truly did give me a bargain I might consider doing it.happy [OreoCookie3]
I know, I have real mixed feelings on this too. I hadn't known about them having to make the parts available for 10 years until this discussion but the car I was driving until this spring was a 1990! I guess I'm just a bit of a skeptic, especially if I'm going to make a major purchase like a car. I know Chapter 11 bankruptcy doesn't mean a company's going out of business and that much of the time they don't but there's always that chance and with the economy and credit crunch like it is who's to say anybody is going to be able to buy vehicles now anyway? Although, right now I must admit if I could get a really good bargain and if I were able to get a vehicle in the near future I'd probably grab the best buy I could get and hope "Murphy's Law" leaves me alone for once. Annie [anniepa]
I don't think so either. I know I wouldn't want a car from that company. [Bd200789]
So what´s chapter 11? Myself,I should never ever buy vintage drum parts from a bankrupt company [ennasus59]