Monday, December 15, 2008

No Bailout for the Big Three

Whether it was a good decision or not remains to be seen, but the Big Three automakers – Chrysler, Ford, and GM – won’t be getting the $14 billion loan they requested from the federal government. The bailout deal failed in the Senate with a 52-35 vote, but needed at least 60 votes to move to the next stage of the voting process.

While Ford executives have said they could possibly withstand the crisis, at least for a few more months, neither GM nor Chrysler is expected to withstand. Both companies are expected to go bankrupt in the coming months.

A bankruptcy for GM and Chrysler doesn’t mean the giant automakers will cease to exist, but there will be some major changes in the way the companies do business. First, as the companies restructure their businesses under bankruptcy, they could cut their operations leading to massive layoffs. Then, there would be many dealership closings from those who specialize in GM and Chrysler. That means a further reduction in the workforce and a reduction in the revenue for the cities and states where those dealerships operate.

Car buyers would likely have fewer brands to choose from when they’re shopping from GM and Chrysler brands as the company get rid of some of their bottom performers. GMC, Pontiac, Buick, Saab, Saturn, Hummer, Volvo, and Dodge are on the chopping blog, according to CNNMoney.com.

If you already have a Big Three vehicle, you might wonder whether your warranty is still covered. Since a warranty is a contract offered by the car manufacturer, it’ll still be valid. Of course, the hard part will be finding a dealership to do warranty repairs given that many are expected to close.

Leases are contracts too and you can’t get out of one just because the dealership closed down. If your dealership is closing, find out what to do with your vehicle when the lease ends.
On the bright side, you can expect to see some competition in the form of incentives. So, look for a good deal if you’re on the market for a new car in the coming year.

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