Bailout Watch 470: Chrysler RIP, GM Headed for C11? [Download Federal Warrantee Commitment Program Here]

by Robert Farago

March 30th, 2009 2:23 PM

bailout watch 470 chrysler rip gm headed for c11 download federal warrantee

The Presidential Task Force on Automobiles (PTFOA) has seized control of Chrysler and GM, the latter more completely than the former. As part of their Monday manifesto, the PTFOA has laid the groundwork for Chrysler’s liquidation and GM’s entry into Chapter 11. They’ve created a new Warrantee Commitment Program that will guarantee Chrysler and GM vehicle purchases, even if (when) the automakers go belly-up. TTAC’s Ken Elias calls ChryCo’s final approach. “To do the Chrysler–Fiat deal, the secured bank lenders need to write off their loans. Why would they? They get more in a Chrysler liquidation. And even if they make a ‘deal’ with Fiat, so what? How does it solve the problems for the next several years before any Italian technology (small cars, small engines) shows up in Chrysler products? So Chrysler goes to liquidation.” As for GM, even the neophytes at the PTFOA know it can’t do what it needs to do outside of bankruptcy. Given that the automaker will now have the full backing of the federal government, controlling everything from car “warrantees” (warranty?) to the Board of Directors, why not? Who wouldn’t trust American Leyland?

Comments

Join the conversation

4 of 37 comments

Zammy on Mar 30, 2009

Interesting. Now I can purchase a new Chrysler with a lifetime powertrain warranty, AND have that warranty be backed by the government. Hello 30-year warranty coverage. If you do it right, you can even sell the car and keep the lifetime warranty in place FOREVER.

Like Reply
Psarhjinian on Mar 30, 2009
GM didn’t make bad cars just because they were greedy or stupid, they made bad cars because they couldn’t afford to make good ones. Ok, let's assume that GM is at a disadvantage per car purely because of legacy costs. I won't argue that a few bucks per car matters in a large scale. There are ways to deal with this, not the least of which is "add value without adding significant cost". You can do this in all sorts of ways: making the product a better performer (and really, the Corolla isn't that good a car, in holistic terms), you can make it higher-quality, you can offer a bulletproof warranty. Most importantly, you can not piss off your customers, tarnish your image and kill your products' market value through nonsense pricing schemes like Value Pricing and toe-tag sales. But this is what GM did not do. What they did do is take a small cost differential and turn it into a massive one, especially on their commodity products, where they could least afford it. By that measure, the UAW is responsible for perhaps a quarter of the cost disadvantage.

Like Reply
Speedlaw on Mar 30, 2009

So does this mean we can continue to make shoddy cars, and the Govt will pick up the transmissions/intake manifold/etc issues that WE should have fixed ? sweeet ! GM didn’t make bad cars just because they were greedy or stupid, they made bad cars because they couldn’t afford to make good ones. Oh, they could make good ones if they wanted....it was cheaper to make shoddy ones, which once they passed warranty, were no longer a concern, and a motive to "buy a new one". This worked until Honda, et. al. came out with cars that would last 200k properly maintained. Suddenly the D3 car having major failures at 80k (but safely out of warranty) became unacceptable.

Like Reply
Paris-dakar on Mar 31, 2009
With the possibility of the warantee going away, nobody would touch a GM car. Not necessarily true, I'd consider a Tahoe at a substantial discount - think sub $20K for a 4X4 - and purchase a 2nd Party Warranty. Let's face it, any Big Three warranty through their dealerships was of questionable value anyway. When I bought my Jeep, I wished there was a 'Delete Warranty' discount option so I could have rationally considered the value of the warranty. If nothing else, it would be nice to see some calculation as to what specific value a warranty adds to the vehicle. I think the fear of this is greatly exaggerated. There might be benefits to eliminating the Factory Warranty.

Like Reply