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Would You Buy a Car From a Company in Bankruptcy?

The troubled Big Three Detroit automakers -- GM, Ford and Chrysler -- have consistently opposed bankruptcy as a way out of their struggles, an option advocated by a number of others.

Their argument: No one wants to buy a car from a company in bankruptcy. Consumers would not sink $25,000, $35,000 or $50,000 into a new vehicle with no confidence that the company they bought it from would still be around to service the vehicle and provide parts, the automakers say. Not to mention what it would do to trade-in value.

Further, they say, the precipitous dive in sales would drive the automakers from Chapter 11 -- restructuring bankruptcy -- into Chapter 7 -- liquidation bankruptcy. If you force us to go into bankruptcy, the Big Three say, you dig our grave.

The automakers have trotted out numerous surveys to support their case.

We want to know what you think: If GM, Ford and/or Chrysler declared Chapter 11 bankruptcy, would you buy a new or used car built by them?

And here's an additional question: Suppose the warranties on cars built by bankruptcy automakers were backed by the government, as some Republican(!) lawmakers are proposing?

Tell us your opinion in the comments section below.

-- Frank Ahrens

The Ticker is Twittering!

By Frank Ahrens  |  December 12, 2008; 3:15 PM ET
Categories:  The Ticker  | Tags: Chrysler, Ford, GM, automakers, bankruptcy  
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It is pointless to argue whether or not I would purchase a car from one of the big three U.S. automakers GM, Ford, or Chrysler on the basis of whether they are in bankruptcy. I wouldn't purchase a car from these companies because they don't produce a car that would interest me. It's that simple, start making a car that is built as well and priced as well as Toyota, and then maybe I might consider it. I don't believe the U.S. taxpayers should be bailing out faltering corporations that lack any foresight into consumer likes and dislikes. It is GM, Ford and Chrysler's fault for not adapting to the economy quickly enough to respond to the financial downturn and staying in tune with the consumer's wants.

Posted by: JJG01 | December 12, 2008 4:26 PM | Report abuse

Were any of these firms to file for bankruptcy, their sales would probably collapse permanently. Republican senators from southern states with non-union foreign auto plants are just looking for excuses to drive unionized auto plants in northern states out of business, for partisan and sectional reasons.

I currently drive a Ford, am happy with it, and view the quality of American cars as having improved greatly in recent years. I would be very hesitant, however, to buy a car from any company that had filed for bankruptcy. My main question would be whether the manufacturer and its parts suppliers would still be in business long enough that my mechanic could get the spare parts needed to repair the car by the time it was old enough to need any major work. Whether some federal law purported to establish some legal requirement for the manufacturer to honor a paper warranty would be completely irrelevant.

The biggest problem that the auto industry currently faces is not consumer resistance to American cars, or the burden of providing benefits for retirees, but the credit crunch which makes it almost impossible for customers to obtain car loans. It isn't just GM, Ford and Chrysler. In November, Honda's sales were down by 32%, Toyota's were down by 34%, and Nissan's sales were down by more than 44 percent, which was worse than even GM's results. It isn't just fuel-guzzling SUVs, either -- sales of the feul-efficient Honda Civic, which gets 40 MPG on the highway, were down by 30% in November. An additional factor is rising unemployment, which has even people who are currently working so scared about the risk of losing their jobs that they aren't willing to purchase big-ticket items such as cars.

The willingness of Republican senators to vote for $700 billion in bailout funds to address the credit problems of banks, while refusing to approve a $14 billion bailout to address the credit problems of major manufacturing firms that employ hundreds of thousands of Americans, is simply ludicrous. If this bailout collapses, these firms fail, and their workers become unemployed because Republican senators were too focused on their anti-union agenda to see the forest for the trees, the blame will rest squarely on the Republican party.

Posted by: 02Pete | December 12, 2008 5:59 PM | Report abuse

Historically, once a car company is in tough financial condictions consumers back off. There are precedents to be found in the graveyard of American auto companies. I recall during the 60s Studebaker suffered from this condition. I remember people saying they didn't want to buy an "orphan". The idea that bankruptcy is the answer seems to work if you are talking about an airline ticket or consumer item that does not require a long-term relationship with the seller. The Republican senators who are sticking a knife in American industry need to be held out for what they are. Their idea of trying to match the lowest paid workers is not the solution. There will always be workers somewhere in the world who will do a job for less. The Republicans vision of the future is to have no unions and no middle class.

Posted by: cdierd1944 | December 12, 2008 6:10 PM | Report abuse

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