GM Bankruptcy, What Does it Mean?

General Motor’s decision to file for Chapter 11 bankruptcy has created a lot of uncertainty for both car buyers and owners of GM vehicles.

While it’s too early to know how all of the variables will play out, both the company and the federal government are hoping for a relatively short restructuring period.

Ideally, GM will emerge from this as a leaner, more streamlined automaker—with fewer brands, dealerships, and models—that is better positioned to compete in today’s automotive environment.

In the meantime, the restructuring processes could be fairly transparent for most car buyers and owners.

Exceptions include those who have a local dealership close its doors or discontinue carrying a certain brand. And for car shoppers in general, it could be a great time to buy.

1. Will I be able to get parts and service for my GM car?
GM has said that it will continue to support their authorized dealerships with parts during this restructuring period, so that the dealers can continue to service your vehicle. Of course, common third-party replacement parts are also widely available through auto-parts stores.

Keep in mind that you don't have to take your car to a dealership for servicing, even if it’s under warranty. A good independent shop, especially one that specializes in your car’s brand, should be able to handle routine maintenance and many repairs. Moreover, independent repair shops are often less expensive than dealerships and, according to our Annual Auto Survey, generally provide a higher level of satisfaction. You will need to go to a dealership, however, for warranty and recall work.

2. Will GM still back my warranty?
GM has said that it will continue to support its vehicles’ warranties during this restructuring period.
In addition, the Treasury Department’s Warranty Commitment Program says that the federal government would back warranties for any GM vehicle bought during the restructuring period, should the automaker go out of business. The government would contract with a third-party auto-service provider to provide warranty repairs. Such a program might not run as smoothly as an automaker program, but it wouldn’t kick in unless the automaker is liquidated.

3. Will this affect the resale value of my GM car?
With the uncertainty surrounding GM, it’s likely that its cars will drop in value during this restructuring period, especially for brands that are being phased out or sold. But if the company re-establishes itself as a strong, stable automaker in future months, ongoing models could see a rebound in value.

The resale value for brands that are discontinued is likely to drop dramatically, as happened when GM phased out Oldsmobile in 2004 and Chrysler dropped Plymouth in 2001. This would have the most effect on owners who keep their vehicle for only a few years, say five or less. But if you plan to keep the car for a long time, depreciation is less of a factor.

To help compensate for this drop in value, GM is currently offering a sales-incentive program that gives you extra money if you trade in a current GM car for another. It also covers selling your car privately, but you still need to buy another GM vehicle within a certain period of time. For details, go to www.gm.com/vehicles/currentoffers/.