Detroit, MI – President Barack Obama made clear at his press conference on Monday that the U.S. government would stand behind warranties on cars purchased while the automakers restructure. “Let me say this as plainly as I can. If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired just like always,” Obama said. “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.”
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That surely boosted the confidence of prospective car buyers and sent a strong message to the UAW and bondholders that the government is dead serious about implementing a major restructuring of both companies — and won’t wince at bankruptcy if that’s what’s required to get the job done. GM’s CEO, Frederick A. Henderson, basically repeated that message at his Tuesday morning press conference, even going so far as to say that bankruptcy was now “more probable,” though not desirable.
But for many current and future GM or Chrysler car owners — and more than a few car dealers — the government promise is a bit of a head spinner. For example, if you’re the happy owner of a GM or Chrysler car now, does the new government backing pertain to you? (No.) If you purchase a GM or Chrysler car today, are you covered> (Yes.) Last week? (No.) And if you buy while either company is in bankruptcy? (Yes.)
Under the plan, called the Warranty Commitment Plan, both Chrysler and GM will contribute money to a special purpose company that will ultimately hold enough money to cover 125% of potential warranty claims. GM and Chrysler would contribute 15% of the required funds and the Treasury would put in the rest. This special company would be separate from the automakers and would continue to pay for warranty service in the event of bankruptcy or liquidation. It does more: If Chrysler were liquidated in bankruptcy, for example, the warranty company would find a new service provider to oversee warranty related body work.
At this point, the promise is grand but vague. Warranty administration is a sub-specialty in the auto business that relies on precise language. When carmakers say three years and 36,000 they mean exactly three years and 36,000 miles. Any changes or extensions, while not uncommon because of pressure from state lemon laws, are reviewed by senior management. Dealers get some leeway but not much, and taking a car to an unauthorized repair center can effectively negate the warranty. “None of this is clear,” said one dealer, referring to the many nuances of warranty work that are yet to be defined in the government’s plan. He also noted that if GM is forced into bankruptcy dozens of dealership could close and consumers would be left guessing where to take their vehicles.
Indeed, if bankruptcy occurs, many existing GM and Chrysler owners still under warranty face an as yet undefined level of support. So if you’re sitting in your 2008 Chevy Tahoe and wondering where all this talk of bankruptcy and government backed warranties leaves you, the answer is, nobody’s quite sure. And that may not be the best place to leave a loyal GM customer who bought when few would
don’t you worry. you have a 100% warranty. you can trust me.
The only GM brands still viable are Chevy and Cadillac – maybe, maybe GMC. Buick, Pontiac and Saturn will go away. The parts are all the same Delco chazzerai across the brands, so those won’t be an issue.
Not so fast! A Brooklyn car dealer told me that Chrysler/Dodge has closed all of their Brooklyn-area service centers. That means you need to drive far to get that service and wait much longer while your car waits for repairs. No one is even talking about if GM or Chrysler were to fold and you did need real warranty work, what kind of bureaucratic paperwork would you need to go through to acertain your eligibility.
Do you owe taxes? Go pick up your car from the Service Center and find out that they’re holding it for non-payment of your federal taxes.
Have a fancy car and also have some federal “low-income” programs? Go pick up your car from the Service Center and find out they’re holding it until you clarify how you can afford it.
I’m still trying to figure out how a President can offer warranty protection without Cognress voting on it first. But why do I bother; the guy thinks he is king.