How Auto Restructuring Will Affect Consumers

By Ylan Q. Mui
Washington Post Staff Writer
Wednesday, February 18, 2009

General Motors and Chrysler delivered their plans for survival yesterday to the White House in order to receive billions of dollars in loans. Here are some answers to questions about how their restructuring could affect what's in your garage.

QWill the warranty on my car or truck be affected?

AThe short answer is no. The automakers are obligated to fulfill their end of the contract as long as they remain open for business, said Philip Reed, senior consumer advice editor at Edmunds.com.

General Motors has said several times it will honor all outstanding warranties in the United States and worldwide as it attempts to stay solvent. At Chrysler, a spokesman said yesterday that the company "stands by its customers."

However, if an automaker did fall into bankruptcy, the fate of consumer warranties would be unclear. Reed said the issue likely would be addressed quickly in that worst-case scenario.

What happens if one of the automakers goes bankrupt?

To be clear, General Motors and Chrysler are developing survival plans to avoid just that. They maintain that bankruptcy would destroy consumer confidence in their brands, decimating sales. And even if it were to occur, how it would be structured remains to be seen.

One thing, however, is certain: You must keep paying your car note no matter what. In the event of bankruptcy, a third party, possibly the government, would take over the company's debt and seek payment. You would still need to write the check; the name you'd write on it could change.

Will my car's brand be sold?

As the automakers hunt for ways to save cash, they will be targeting brands with poor performance. GM has said its Swedish-based Saab line has been struggling for two decades, and it has put the brand up for sale, along with its tank-inspired Hummer. Ford is trying to shed its luxury Volvo division, the last of its foreign brands.

No buyers have stepped forward publicly for any of the lines. But if they do, one of the biggest questions for customers likely will be whether they will make changes to service plans or warranties. But that's impossible to answer until a deal has been done.


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