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How GM's Bankruptcy Affects You

Posted: Jun 02, 2009 11:15 a.m.

America's largest automaker, once the world's largest company, is in bankruptcy.  With government assistance, General Motors plans to emerge as a more competitive company - but a much smaller one.  What does GM's failure mean to you? 

Your Warranty is Still Good

The Salt Lake Tribune explains, "When it comes to warranties, buyers are in a more secure position than they were in the past."  The federal government has guaranteed warranties on behalf of the failed automakers.  The Tribune notes that, in a March speech outlining the program, President Obama told Americans, "Your warranty will be safe. In fact, it will be safer than it has ever been because starting today, the United States will stand behind your warranty."

Your GM Car's Resale Value Will Take a Hit

The New York Times predicts that, for owners of GM vehicles, "The value of your cars will probably fall faster than it would have absent bankruptcy. How much further it falls will depend on the model, the year, economic conditions going forward and how the company handles itself in bankruptcy."

Your Dealership May Close

Chicago CBS affiliate WBBM-TV reports, "in the next few months...2,400 dealers are expected to lose their GM licenses."  General Motors already had plans to close many dealerships in a controlled process over an 18-month period, but it isn't clear yet how bankruptcy might accelerate that process.

You Will Still Be Able to Find Parts for Your Car

The Los Angeles Times reports, "Dealers will still have the parts."  In fact, GM continues to manufacture replacement parts for certain Oldsmobile models - and that brand has been closed for nearly a decade.

Your GM-Branded Credit Card is Still Usable, but Its Rewards May Not Be

According to the Los Angeles Times, "The credit cards are still valid. But the status of the earnings program, in which card users earn credits toward purchases of new vehicles, is in the hands of the Bankruptcy Court during the filing period. GM has asked the court to maintain the program."

Your OnStar Button Still Works

In a letter to customers, GM explains, "There is no impact to OnStar service; your OnStar subscription will remain in place."

New Car Prices May Go Down

Kicking Tires explains, "When Chrysler went into bankruptcy, the manufacturer's cash-back incentive figures actually decreased. Because many dealers were closing, however, they beefed up deals on their end."  So while advertised prices weren't necessarily lower than they had been pre-bankruptcy, many consumers found it easier to negotiate low prices at the dealership.  "Don't expect major fire sales, except at shuttering dealers or on brands that are for sale, like Hummer, Saturn, Saab and Pontiac," KT writes.  But, if GM closes some dealerships quickly, "they could see sales similar to Chrysler's closing shops."

Your GM Stock is Almost Worthless

The New York Times explains, "The shares will no longer trade on the New York Stock Exchange beginning on Tuesday. But the stock may begin to trade, in a limited fashion, on the Over-the-Counter Bulletin Board and/or the Pink Sheets, electronic quotation systems for companies that do not meet the listing standards for the stock exchanges. Contact your stock broker for more information on how that is done."  However, they caution, "Getting rid of the stock may be difficult at this point. And if you have too few shares, the brokerage commission alone may wipe out any profit you would stand to make."

Some Experts Say the Economic Recovery Will Slow

USA Today reports, "Economists agreed Monday that the bankruptcy filing of the once-mighty General Motors Corp. will be a blow to the American economy. The filing comes at the same time the economy was starting to show glimmers of hope with the rate of economic decline slowing and consumer confidence rebounding, economists said."  The move may further depress auto sales, and be a blow to consumer confidence.  In previous economic downturns, an increase in auto sales has signaled recovery, but experts say this time "the auto industry won't be the white knight it was during previous recessions."

Auto Racing Will Change, but it Won't Go Away

The Dallas Morning News explains, "GM doesn't disclose its annual investment in NASCAR, including track deals and support to race teams, but estimates run as high as $125 million."  NASCAR officials expect that "GM will walk away from [some] expiring contracts at the end of the year, yet remain invested enough to maintain a profile with NASCAR's legion of brand-loyal fans."  In fact, some hope that "A leaner company with less debt coming out of bankruptcy could be in a greater position to take advantage of its built-in marketing advantages within NASCAR."

If you're in the market for a new car, check out the U.S. News rankings of this year's best cars as well as this month's best car deals.