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.
Looking for a car loan? Click here.
Showing posts with label auto industry. Show all posts
Showing posts with label auto industry. Show all posts
Monday, December 15, 2008
Monday, November 24, 2008
The Big Three Automakers Ask Uncle Sam for Help
The Big Three automakers – GM, Ford, and Chrystler – have warned that their ragged financial state could cause them to fail within the next year, if not within the next weeks. Their demise could lead to a collapse of the entire auto industry. If these three automakers fail, the U.S. economy could lose up to 2.5 million jobs, estimates Associated Press. So, the three have joined together to petition lawmakers for bailout of $25 billion.
Chief executives blamed credit problems and decreased SUV and truck purchases as the reason for their problem. Rep. Michelle Bachmann, in a statement to Congress, points out that foreign manufacturers operating in the U.S. – Toyota, Honda, and Nissan – have remained profitable despite the crisis. She suggests the companies instead restructure their debts under Chapter 11 bankruptcy. A bailout, she says, won’t fix the companies long-existing systemic issuers.
While they claimed the companies were struggling and on the brink of bankruptcy, the chief executives this week arrived at the Washington hearing held to discuss the bailout in multimillion dollar corporate jets. Hardly the choice of transportation for a near-death auto manufacturer. That decision has many skeptical about whether the companies actually need a bailout and whether they would spend it wisely.
Whether the bailout would actually help the auto industry is questionable. IndyStar reports deeper problems with the way the auto industry is structured. For example, high costs of pension and health-care benefits contribute to the companies’ high overheads. Left unsolved, these problems could lead to bankruptcy, bailout or not.
Lawmakers won’t vote on the bailout until the automakers return with a plan for how they’re going to spend the loan money. If approved, the bailout won’t come from the $700 rescue plan approved for banks earlier this year. Instead, the Bush administration recommends spending from a pool of funds that’s dedicated for more production of more fuel-efficient cars.
The government has already spent or promised to spend nearly $1.5 trillion on bailouts. Where will the line be drawn?
The Big Three have until December 2 to come up with their plan for spending the $25. Then, Congress would meet on December 8 to make a decision.
Chief executives blamed credit problems and decreased SUV and truck purchases as the reason for their problem. Rep. Michelle Bachmann, in a statement to Congress, points out that foreign manufacturers operating in the U.S. – Toyota, Honda, and Nissan – have remained profitable despite the crisis. She suggests the companies instead restructure their debts under Chapter 11 bankruptcy. A bailout, she says, won’t fix the companies long-existing systemic issuers.
While they claimed the companies were struggling and on the brink of bankruptcy, the chief executives this week arrived at the Washington hearing held to discuss the bailout in multimillion dollar corporate jets. Hardly the choice of transportation for a near-death auto manufacturer. That decision has many skeptical about whether the companies actually need a bailout and whether they would spend it wisely.
Whether the bailout would actually help the auto industry is questionable. IndyStar reports deeper problems with the way the auto industry is structured. For example, high costs of pension and health-care benefits contribute to the companies’ high overheads. Left unsolved, these problems could lead to bankruptcy, bailout or not.
Lawmakers won’t vote on the bailout until the automakers return with a plan for how they’re going to spend the loan money. If approved, the bailout won’t come from the $700 rescue plan approved for banks earlier this year. Instead, the Bush administration recommends spending from a pool of funds that’s dedicated for more production of more fuel-efficient cars.
The government has already spent or promised to spend nearly $1.5 trillion on bailouts. Where will the line be drawn?
The Big Three have until December 2 to come up with their plan for spending the $25. Then, Congress would meet on December 8 to make a decision.
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