Topic: Why Bankruptcy would spell disaster for Big Three’s sales

[ArticSteve]

Although not the most ground breaking report we’ve ever come across, a new study released on Wednesday finds that the vast majority of Americans would abandon their new car buying plans if the company behind the brand they were considering filed for bankruptcy.

According to the study – which was conducted by CNW Research – 80 percent of consumers would balk at buying a new vehicle from any of General Motors’ or Ford’s brands if either automaker filed for Chapter 11 protection.

Chrysler would fair even worse, with 91 percent of the 6,000 people surveyed saying they would steer clear of a Chrysler, Dodge or Jeep branded vehicle in the event of a Chrysler bankruptcy filing.

All three of the major domestic automakers are adamant that bankruptcy rumors are unfounded, but the study clearly shows the detrimental effects a bankruptcy filing would have on any of the Big Three. If any automaker were to lose 80 percent of an already declining market, there would be no coming back from the brink.

[Zoo]

Jeesh! More crappy news...

Where does that leave the "big" 2.8 then? Will they be in better shape if they can limp into 2010 when the new deal with the UAW kicks in? I guess they had better keep making good/great cars like the Malibu and ensure that the replacement for the Cobalt is extremely competitive.

The SUV party is over and the hangover is nasty.

[initial_D]

According to the study – which was conducted by CNW Research – 80 percent of consumers would balk at buying a new vehicle from any of General Motors’ or Ford’s brands if either automaker filed for Chapter 11 protection.

I am suprised that there are people will still buy a car from a company that will go belly up.

[PJungnitsch]

The bright spot though is that all three would not go bankrupt at the same time. What happens is one is forced to go bankrupt and then all/most of their faithful domestic shoppers go to the surviving two.

You can see why executives are going to deny, deny, deny bankruptcy until the last possible minute, hoping that one of the other companies caves first, and they can 'feast on the carcass'.

[Serniter]

I guess Chrysler gets to be carcass first? Can't recall ever meeting a Chrysler supporter on this forum.

[mmret]

There was one, but he left because we made fun of Chrysler too much.

[Trainman]

According to the study – which was conducted by CNW Research – 80 percent of consumers would balk at buying a new vehicle from any of General Motors’ or Ford’s brands if either automaker filed for Chapter 11 protection.

I am suprised that there are people will still buy a car from a company that will go belly up.

So am I.  I would not consider any product from a company that I know has declared bankruptcy.  Too many unknowns re warranty and parts.  I was worried enough when my tire store went under and how to get warranty on the new tires.

I wonder what a survey would say if the question was "Would you buy a car from a company that may go bankrupt?"   The Big 3 need to somehow squash these bankruptcy rumors once and for all, if they can.

[Leviathan]

The sky hasn't fallen yet....

[toolatecrew]

I would buy a car from a company that had gone bankrupt.If the price was right. Lets say Chrysler does (they are most likley IMO) They are a huge company. Would all the dealerships and their parts and service departments shut down the next day?Of course not. You are going to be able to find parts and service for years and years to come for most products. The general backlash would be huge. Dealers would be stuck with inventory that they can't sell. So IF this caused a car I didn't mind to be sold at a rediculous price then yeah I'd buy it just as I'd buy a used car and worry about parts and service myself. The existing nextwork is HUGE.

Now if Mitsubishi went bankrupt no I wouldn't buy a car becuase their is little infrasturcture in Canada and therfore little support for me to do it on my own (although if they wanted to sell me an evo for 2 000s as a liquidation sale I'd probably bite).

[tpl]

The trouble with the argument that parts will be available for years is that every car has some unique part that doesn't often fail and there will be low inventory of those. Recent thread about a new Malibu comes to mind.  Another recent thread about the availability of electronic parts after they are out of production.

 Unless the car is really interesting the aftermarket won't bother to make the parts either.  So IMHO if GM disappeared you'd be able to get parts for Corvettes for 20 years at least but parts for the Cobalt... once the original stocks ran out not a chance.

[UmroAyyar]

I don't know the exact circumstances.

Air Canada declared bankruptcy to restructure itself, people lost their investments, jobs etc. Its back again.

[tpl]

Air Canada is really an arm of the state and would not be allowed to disappear.  IIRC there was an Act of Parliament to restructure it... with various dumb things in it for political reasons.

[tenpenny]

Air Canada is really an arm of the state and would not be allowed to disappear.  IIRC there was an Act of Parliament to restructure it... with various dumb things in it for political reasons.

Air Canada is not owned by the gov't any more, it's a private corporation.

As for bankruptcy, Chrysler went down this road before, didn't they? 

[UmroAyyar]

Air Canada is really an arm of the state and would not be allowed to disappear.  IIRC there was an Act of Parliament to restructure it... with various dumb things in it for political reasons.

Thats not true. Air Canada rejected loan guarantees from the then government. It went about its operations as a commercial company, not a crown corporation, which it wasn't since 1988. Here's the info.

And, CAW and Buzz Hargrove helped turn Cerberus away from takeover.

http://www.cbc.ca/news/story/2003/04/01/aircan030401.html

[tpl]

I didn't say that AC was a Crown corp, or a part of the Government I said it was an arm of the state. What I meant maybe badly expressed, that AC, as Canada's flag carrier would not be allowed to disappear.  When it was privatized that came with various ill thought out rules, such as the head office in Montreal rather than its ancestral home in Winnipeg and so on.

[UmroAyyar]

I didn't say that AC was a Crown corp, or a part of the Government I said it was an arm of the state. What I meant maybe badly expressed, that AC, as Canada's flag carrier would not be allowed to disappear.  When it was privatized that came with various ill thought out rules, such as the head office in Montreal rather than its ancestral home in Winnipeg and so on.

True, its interesting how Chrysler managed their situation. Has there been any other volume auto maker other than smaller ones to manage a turn around?

[xviper]

Whether or not they actually declare bankruptcy, just having such a survey and having the results of the survey being tossed around coffee tables, office water coolers, etc, is enough to begin rumours that it "might" happen.  Some people may not think twice about buying a car from a manufacturer even if they are going under, but I would think the vast majority of car buyers will avoid it like the plague at the slightess possibility that it might.  Rumours drive the world of investments, stocks and bonds.  Would it be so different for the car industry?

[toolatecrew]

Whether or not they actually declare bankruptcy, just having such a survey and having the results of the survey being tossed around coffee tables, office water coolers, etc, is enough to begin rumours that it "might" happen.  Some people may not think twice about buying a car from a manufacturer even if they are going under, but I would think the vast majority of car buyers will avoid it like the plague at the slightest possibility that it might.  Rumours drive the world of investments, stocks and bonds.  Would it be so different for the car industry?

While I might buy a very cheap car from a manufacturer in bankruptcy I think you are very right here.

In particular car sales is a competitive cutthroat business. If I was selling Hyundai and thought I could sway a particular customer into buying my car TODAY simply by having an article sitting on my desk saying Chrysler senis bankruptcy and option despite evidence I'd darn well do it. Its an objection that people at the sales level have little credibility or chance to overcome. "I'm nervous about buying a Stratus I read you might go bankrupt what happens then" Salesperson :"its not true no need to worry" What the heck do you think they are going to say. Heck the rumors will keep some people out of the show romm entirely so you never get CHANCE to counter the objection.

This is already going to hurt sales even if its not true. Add things are are occurring right now (strikes delaying GMs new crossover which is going to result in missinmg sales PROJECTIONS) and it becomes a self fulfilling prophecy.

"I heard GNM is going bankrupt because its not selling enough cars or making profit"
"Naw not ture sales are great and they have a new profitable CUV"
"Well Joey decided to buy a Hyundai because GM might go bankrupt so they just lost a sale"
"GM missed its sales projections (because of the CUV delay) so sales are bad they must be going bankrupt"
"Oh guess I better not buy a GM"

It can really snowball. The problem is how do you stop the snowball?

1. Have sales figures that show a big increase. Tough to do when truck SUV sales suck everywhere and your CUV has been delayed by the union.
2. Do something noteworthy to show increased profitability. Plant closings and job cuts do this but they also don't indicate RISING sales .
3. Selling off divisions can raise $ but once again sends the message that if I buy a car from X that the company could be sold off tomorrow and I'm left in the lurch.

They are in big trouble just trying to prevent the prophecy from fufilling itself

[Schmengie]

The trouble with the argument that parts will be available for years is that every car has some unique part that doesn't often fail and there will be low inventory of those. Recent thread about a new Malibu comes to mind.  Another recent thread about the availability of electronic parts after they are out of production.

 Unless the car is really interesting the aftermarket won't bother to make the parts either.  So IMHO if GM disappeared you'd be able to get parts for Corvettes for 20 years at least but parts for the Cobalt... once the original stocks ran out not a chance.

  Not only that, but remember when AMC went t!ts up? Except for the Jeep and Eagle divisions which were absorbed by Chrysler, literally a day later AMC dealerships disappeared. IIRC not one of them stayed open just to provide parts and service.

[ArticSteve]

 

Dealers would declare bankruptcy immediately to protect themselves and private shops would spring up were there was enough demand to provide service.