• Nov 14, 2008
In recent weeks, the idea that one or all three of Detroit's automakers could end up filing for chapter 11 bankruptcy protection in the coming weeks or months has gained a lot of momentum. In theory, the advantage of chapter 11 is that it provides protection from creditors while the company is reorganized in a way that it can survive. The company is allowed to continue operating in this mode, thus avoiding a complete shutdown. A number of major airlines have done this and managed to keep operating, although some have ultimately failed anyway. There is a big difference between a plane ticket and a car. With an airline, you buy your ticket, take your flight and then (hopefully) walk away. After the flight, there is no expectation of ongoing service and support. A car is a much larger purchase and expected to operate for 10-15 years. Warranty service is demanded during that time, and spare parts need to be available on an ongoing basis. Given the long-term requirements of a car, a chapter 11 filing could be a death sentence for a manufacturer as customers look elsewhere. So the question we ask you is, "Would you buy a car from a company in bankruptcy?"



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  • 47 Comments
      • 6 Years Ago
      I recently read this on a blog and am copying here because it certainly is relavent:

      "In order to seek so-called Chapter 11 status, a distressed company must find some way to operate while the bankruptcy court keeps creditors at bay. But GM can't build cars without parts, and it can't get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. But the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

      "That's why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation."

      If that happens, we're all screwed. I always remember the old saying "When GM sneezes, the world catches a cold."

      I haul cars around the country for a living, and one of our biggest clients is GM, hauling test cars from Milford to Mesa (soon Yuma). They take 120 days to pay our invoices. I'm not looking forward to whatever is going to happen.
      • 6 Years Ago

      Depends on the car. Maybe something like the new CTS, G8, Suburban, Tahoe, Viper, Challenger, Mustang, Corvette, Camaro, Wrangler etc.
      • 6 Years Ago
      I'd buy a used car made by a company that's in bankruptcy. No new cars, please.
      • 6 Years Ago
      The risk of bankrupt car companies not honoring a new car warranty is yet another reason to buy used cars instead. There are 3 more reasons in my blog post:

      Karma, Carcinogens, and Cash…three reasons to buy a used car instead of a new one.
      • 6 Years Ago
      Depends on the car. A car like the Corvette with an LS series motor is a good bet for future parts and resale value. A Malibu, despite being a great car, isn't as good of a bet.

      • 6 Years Ago
      I'd buy a Viper or a Vette
      Sqube27
      • 6 Years Ago
      It depends on the car. If Pontiac was going under, I'd gladly take a black G8 GT (6spd man, of course) off their hands.

      I know that, in all probability, I wouldn't get the benefit of the warranty. But for the price, I feel like I'd be willing to risk it.
      • 6 Years Ago
      Republicans are against it for good reason. Why should tax payers bailout, or give a low interest loan, to a company that has no future on its present course. Its best option would be to make a deal to like 1979 with Chrysler or to force them into chapter 11 and require a business plan of what they will change and how they will be better. They should definitly not require greener cars because they may not be what the public wants. Just require a strict business plan for 3 or 4 years on their changes including UAW benefits being cut and then loan them the money or loan half and try and get private funding to match.
        • 6 Years Ago
        Of course the Republicans are against it. It's socialism. It's like oil company subsidies in a time of massive profits. That's corporate welfare, the spreading around of my tax dollars, like socialism. Oh wait, it was the Republicans who were for that.....
      • 6 Years Ago
      depends on how much of a deal it is , if your desperate to sell me a car I'll buy one.If it's business as usual -no
      • 6 Years Ago
      I won't buy a Desperate-3 car now!
      • 6 Years Ago
      When it comes to a large purchase such as a vehicle, buyers need to be able to justify their purchase with price, quality, sex appeal and company reputation. Buying a car is a very emotional decision with a multi-year commitment. I feel that if any of the Big 3 files for bankruptcy they should expect an additional 40% to 60% reduction in sales.
      • 6 Years Ago
      Make mine a Camaro, Challenger or Mustang. It's an investment. :)
        • 6 Years Ago
        If GM goes under, I'll still be getting a Camaro.
        • 6 Years Ago
        I agree, have fun but keep the mileage low and keep it in the garage and in 25+ years or so it'll be worth a small fortune (just like the one's from the 70's are now). And not to be biased, but particularly the Mopar, only because I see it selling a lot less than the other 2 (just like it did back then).
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