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Americans Would Buy from Bankrupt Automakers

Posted: Dec 17, 2008 11:31 a.m.

The Big Three

can't go bankrupt, their CEOs argued to Congress for weeks. Some analysts believed the three should simply declare bankruptcy in order to end contractual obligations, then restructure under a court's protection and emerge as stronger businesses. But their leaders argued that the companies would never succeed in restructuring under bankruptcy protection because Americans would never buy cars from an automaker that had declared bankruptcy. Any automaker that attempted to restructure would fail, and be forced to close its doors forever and sell all of its assets, they predicted.

Apparently, they were wrong.

The Wall Street Journal explains, "A pair of new surveys suggest buyers aren't completely unwilling to buy a car from an auto maker in bankruptcy court, as long as the federal government is willing to play a role in helping the company restructure." A Merrill Lynch study released yesterday showed that "90 percent of car buyers would consider purchasing a vehicle from a car company in bankruptcy court." Another, by automotive industry analysts at CNW Research, "found 4 percent would consider buying from a bankrupt auto maker if the company were getting help from the government." A previous CNW poll had shown that far fewer would consider buying from a bankrupt automaker, so this result suggests that Americans' attitudes toward a possible Big Three bankruptcy are changing, as long as the government is willing to provide support after a collapse.

A USA Today/Gallup Poll reached similar conclusions. It found that 82 percent of Americans would consider buying an American car today, and 67 percent would consider doing so even if the automaker selling the car was under bankruptcy protection.

Kicking Tires, however, is skeptical of the USA Today/Gallup findings. "It surveyed 1,008 adults over the weekend and found that 61% favored government aid for the automakers. That is considerably higher than any past surveys done on the topic, and it could make that bankruptcy number elevated as well."

Still, if the trend proves true it could mark a significant shift in the debate over a proposed federal bailout of the auto industry. The Journal notes, "The results contradict much of what executives at U.S. auto makers and the United Auto Workers argue would be the impact of a bankruptcy on one or more of the companies."

While the bailout debate goes on, automakers are trying to sell cars as fast as possible with deep