What does the GM bankruptcy mean to you?

General Motor’s decision to file for Chapter 11 bankruptcy has created a lot of uncertainty for both car buyers and owners of GM vehicles. While it’s too early to know how all of the variables will play out, both the company and the federal government are hoping for a relatively short restructuring period. Ideally, GM will emerge from this as a leaner, more streamlined automaker—with fewer brands, dealerships, and models—that is better positioned to compete in today’s automotive environment.

In the meantime, the restructuring processes could be fairly transparent for most car buyers and owners. Exceptions include those who have a local dealership close its doors or discontinue carrying a certain brand. And for car shoppers in general, it could be a great time to buy.

This Q&A provides some guidance to some of the common questions we’re hearing. For more information, go to our Auto Crisis page.

Will I be able to get parts and service for my GM car?
GM has said that it will continue to support their authorized dealerships with parts during this restructuring period, so that the dealers can continue to service your vehicle. Of course, common third-party replacement parts are also widely available through auto-parts stores.

Keep in mind that you don't have to take your car to a dealership for servicing, even if it’s under warranty. A good independent shop, especially one that specializes in your car’s brand, should be able to handle routine maintenance and many repairs. Moreover, independent repair shops are often less expensive than dealerships and, according to our Annual Auto Survey, generally provide a higher level of satisfaction. You will need to go to a dealership, however, for warranty and recall work.

Will GM still back my warranty? 
GM has said that it will continue to support its vehicles’ warranties during this restructuring period. In addition, the Treasury Department’s Warranty Commitment Program says that the federal government would back warranties for any GM vehicle bought during the restructuring period, should the automaker go out of business. The government would contract with a third-party auto-service provider to provide warranty repairs. Such a program might not run as smoothly as an automaker program, but it wouldn’t kick in unless the automaker is liquidated. 

Will this affect the resale value of my GM car?
With the uncertainty surrounding GM, it’s likely that its cars will drop in value during this restructuring period, especially for brands that are being phased out or sold. But if the company re-establishes itself as a strong, stable automaker in future months, ongoing models could see a rebound in value.

The resale value for brands that are discontinued is likely to drop dramatically, as happened when GM phased out Oldsmobile in 2004 and Chrysler dropped Plymouth in 2001. This would have the most effect on owners who keep their vehicle for only a few years, say five or less. But if you plan to keep the car for a long time, depreciation is less of a factor.

To help compensate for this drop in value, GM is currently offering a sales-incentive program that gives you extra money if you trade in a current GM car for another. It also covers selling your car privately, but you still need to buy another GM vehicle within a certain period of time. For details, go to www.gm.com/vehicles/currentoffers/.

To estimate how much your current vehicle is worth and to get the most for your car when selling or trading in, see our used car buying advice.

Should I buy a GM car now?
GM is offering some tempting sales incentives, including zero-percent financing and/or cash rebates, on many of its models, including ones that we recommend. And with slow auto sales and too much inventory, dealers are ready to negotiate. So, it’s likely that you could get a very good deal during this restructuring period.

In addition to advertised customer incentives, automakers often provide behind-the-scenes dealer incentives. Knowing about these can help you to negotiate a lower price. Consumer Reports’ New Car Price Reports give you a list of all national and regional incentives for a particular model, including the hard-to-find holdback amounts, and the CR Bottom Line Price, which factors in all those to give you a good starting point for negotiating the vehicle’s price. Dealer sales incentives can also be found at various auto-pricing Web sites. 

It’s important to remember that any deal is only as good as the vehicle you’re buying. We recommend that you thoroughly research the performance, reliability, safety, owner cost, and owner satisfaction of any model you’re considering. Subscribers to ConsumerReports.org have access to our Ratings in all of those areas.

Several recent GM models have done well in our testing and are very competitive in their classes. This includes the Chevrolet Malibu, Cadillac CTS, and GM’s quartet of three-row, crossover SUVs (Buick Enclave, Chevrolet Traverse, GMC Acadia, and Saturn Outlook). All except for the Malibu, however, have shown below-average reliability in their first years.

Overall, you need to balance a good deal with the risk of greater depreciation, the chance of reduced consumer protections (see What If I Have a Claim Against GM?), and the chance that your local dealership could go out of business in coming months. (GM recently notified hundreds of its dealers that it will not renew their franchise contracts in October 2010. In the end, the company expects to have about 3,600 dealerships in the U.S., still well more than Toyota’s 1,600 or Honda’s or Nissan’s 1,200.)

What brands and models will still be available?
GM plans to trim its number of U.S. brands from eight to four. It plans to retain Buick, Cadillac, Chevrolet, and GMC, while phasing out or selling Hummer, Pontiac, Saab, and Saturn. GM has said that it will not rebrand any vehicles from those divisions to be sold by the remaining divisions.

Pontiac is expected to be phased out by the end of 2010. GM has been meeting with parties interested in buying Hummer, Saab, and Saturn. But since no final details have been announced, the future of those models remains uncertain.

GM has also said that it will discontinue several of its high-performance models by the end of this year, including the Chevrolet Cobalt SS sedan, HHR SS, and Impala SS, the Cadillac STS-V, and the Pontiac G6 GXP. 

What if I have a claim against GM?
It’s too early to tell what will happen, but in the case of Chrysler’s restructuring consumer litigation and many unsettled claims have been frozen by the bankruptcy process. Even the checks for some settled lemon-law claims have bounced, although Chrysler has said they will be reissued.

To get answers to the most common questions and concerns about Chrysler’s and GM’s bankruptcy, check out our Auto Crisis hub.

—Rik Paul

Comments

[Denise Wymore]

Bigger is not better. Better is better.

As a loyal Saturn owner for 16 years (five different cars in that time span) I can honestly say that the "bigger" killed the "better"

What began as an experiment - a different kind of car, a different kind of company sadly ended today for me. My last experience with a Saturn dealership (Smithtown, NY) was as bad as it gets. They have given up. They are bankrupt in spirit, passion and commitment to the customer.

Toyota, here I come.

[steve]

I am 50 years old and just bought a GMC Sierra, it was the best buying experience of my life. They worked hard to earn my business and it is the finest vehicle of any sort that I have ever purchased. I have owned European(BMW) and Honda, Toyota and Nissan. This is the tighest, best built of them all.

[darcib98]

Why are you getting mad at them for giving up when you have?

[Sid Savage Auto Dealer Supply]

I hope everything works out for GM, because the US needs this company to be successful. They are offering great buying incentives to consumers, however, paying a higher sticker price so union workers can get their cut can be disenchanting to new car buyers.

[Confused09]

Is there any information on whether or not GM will continue its incentives beyond 6/1/09? We are needing to purchase a vehicle for our son who will be attending college out of state and want the warranty assurance of a new vehicle. Current incentives are very attractive, but we're having difficulty pulling the trigger.

[philipb]

Steve : Your statement that a GM truck is "the finest vehicle of any sort that I have ever purchased" when compared to a BMW, Honda or Toyota is completely ludicrous.

[Denise Wymore]

@darcib98 - I assume you're asking me this question, which is a great one.

Why am I getting mad at them for giving up when I have?

I don't give up easily. In fact, I've given them several chances to build our relationship back up. But my friends and family are now urging me to get out of this dysfunctional relationship as is evidenced here in a recent blog post:

http://denisewymore.wordpress.com/2009/05/15/saturn-of-smithtown-does-not-value-loyalty/

Please note the links within this post to previous Saturn sagas...it's been going south for some
time now....

[MyMy]

You are better off buying from Ford. They have taken 0 money from the US taxpayer and working hard to make recover by making a better product and competing in the marketplace. Thanks a lot GM for taking billions of dollars from the US taxpayer and ending up in bankruptcy which you could have done months ago.

[Doubter]

Detroit automakers have been denying their decay since the 70's. Poor design, poor product and increasing quality from Japan and affordability from luxury makers. The big three blindly ignored basic economic theories while increasing pay structures and cost cutting and poor quality control seemed to finally catch up with them.

Now, with help of the current sitting President, the average US citizen will be taking on the burden of the ridiculous retirement packages of the workers and management of the UAW. All this while retired Armed Services personnel are being told that their health care costs are going to triple, these men and women who risked their lives, and were paid poorly now have to suffer, and no one is rushing to help them.

Wake up America, there is no free lunch. Seek personal responsibility, and be accountable for your actions.

[Jennifer]

Unions - what else can I say!

[Dealer]

Chrysler quality had hit an all time low. German vehicles rule the list of quality. I dont know about JP vehicles.
The U.S. automkaers did not plan for the future, they didnt worry or have a backup solution when business was good. Ford is next on the list and I dont doubt seeing them in the same situation a year later or less, now Toyota or Hyundai will rule the charts.
I am looking to buy a BMW

[Barbara]

LaST December while GM was begging for money from the government to survive they ripped me off for $5,000.00. My Saturn Vue's engine blew while under manufacturers warantee.The dealer inspected the car and in minutes decided the oil filter blew the engine by collapsing. Bottom line no warrantee although it had been regularly serviced. They would not furnish me with an itemized list of damaged on the engine that needed to be replaced or repaired. GM Customer service had n0 problem with this lack of written documentation. They refused to check the car for validity of charges. They don't do that that said. They trust the dealer. Funny, the same dealer didnt feel like checking my brakes upon request because they must have felt that they couldnt get the inflated price at this point. The told me they were fine. They wouldnt put that in writting either. Nothing wronge. WA LA.. a few weeks later back to my regular Saturn dealer, they said my brakes were totally worn. GM customer service had not problem with these conflicting ideas either. In fact this customer service person was over both dealers. I knew the brakes were bad. That is why I asked them to check them in the first place. The car wasnt stopping properly. Since it cost me $500 to rent a car for the engine job I wanted to have that done at the same time.

How do I feel about GM. After being a GM customer for many years.
Never again.. I feel sorry for the workers and their families. I am completely thrilled personally. Oh, yes, GM said they did me a great favor, they asked the dealer to give me a $120 discount. Then dealer wited to call me to tell me the car was ready 5 minutes before closing time, because he was talking a customer home in my car. Hence another rental day was added but his other customer good a free ride home.Bye Bye GM

[Tom Mathews]

Consumer Reports did more than anyone to kill GM by way of its long time and obsessive love affair with Japanese car-makers.
Thank you for helping to destroy a great American company and hundreds of thousands of American jobs.
Now at least show enough guts to post this comment.

[Dale Stoverud]

1. I sure do like my 2004 Corvette and 2007 Duramax crew cab dually. Much better than the Ford truck. Might my Corvette someday be collectible?

2. My Miata is the most reliable and fun car ever.

3. I have an Audi Allroad and Volkswagons...I WILL NEVER BUY GERMAN AGAIN!

4. My truck with it's deer-killer front-end beats your roller skates anytime, anyplace!

5. Due to the union mix with a future Government Motors Corp, there will probably be a Ford in my future, although the pinko UAW is entrenched there too!

[Aaron]

To Doubter: Ridiculous retirement packages? People who gave their entire lives to a company, worked hard, destroyed their bodies, put their kids through school, paid their taxes so kids could get financial aid for school that their own children didn't qualify for, and acted as the backbone of the economy for the last 60 years, just want a quiet retirement. Which now, they may lose, their entire livelihoods could be lost. And were not talking about lavish pensions here. If it weren't for my parents combined pensions, they wouldn't be able to afford their mortgage payment, which is less than the average rent of a two bedroom apartment in a any not so desireable area of Los Angeles. Entire cities in the midwest are potentially doomed, and you talk about personal responsibility. You seem to have no idea what this means to the very real retirees, numbering in the thousands, who have no idea what they are going to do.

The Japanese car companies have no retirees in the US because they haven't had factories here long enough yet. How can GM or Chrysler POSSIBLY bring their costs in line with that? The demand by the government to do so is basically punishing the longevity and stablility that the US automakers have provided this country.

And one more thing... I am so sick of hearing complaints about the existence of unions... if it weren't for unions we would have no concept of a weekend, or a 40 hours work week, or vacation, or health benefits, or even mid shift breaks. So lay off of them. Every system is occassionally abused, but 99% of union employees as hard working as anyone else, and just want to retire with a little bit of dignity.

[Steven]

Aaron,

It seems like your close attachment to the UAW via your family has somewhat skewed your perception of reality. I do agree with you on a few points. There is legitimacy to most unions. It allows hard working individuals to keep good jobs, make fair wages, and have fair benefits. It helps ensure a quality workforce that you aren't going to find prospecting at the local McDonald's drive-thru. The problem with the UAW is that although the were, in my opinion, overcompensated when times were good they never did enough to help with the labor and legacy costs as market share kept slipping away. In many instances, the quality of the work slipped like GM badges put on upside down or center caps added to wheels from the wrong make. Ultimately they are not entirely responsible for the downfall of the big three and I do sympathize with everyone who has lost their job or source of retirement.

A few other quick points.

Honda has been building cars in the US since 1980. I'd find it hard to believe that no one has retired from their US plants and that they would be leaving with no benefits.

I personally have no concept of a 40 hr work week, weekends off, or many of the other things that people seem to feel entitled to. Too many of us have lost the concept of "what's good for the company" to further our own personal desires or laziness. I'm sorry, but if I don't have the interest of the company in my actions and productivity how can I quaranty that the company we be around in the future to take care of me.

And if someone is retired and still making mortgage payments, maybe some better fiscal responsibility or retirement planning should have been exercised. Unless, I guess, someone planned on the gravy train to never end. Either way doesn't dictate the fairness of one's retirement compensation.

[Greg]

While the US auto situation is sad, it is well deserved and I don't see it getting better. Americans are losing their innovation and work ethic, and the democrats in power are feeding that with handouts and an entitlement philosophy. This is creating a nation of lazy, de-motivated people who feel the government owes them and can take care of them. Thanks, Obama, for continuing to foster that mentality. The automakers never woke up to the fact that this is a global economy and they should have been investing in quality, reliability, and leadership - rather than supporting unions that just suck more money out of the system, kill innovation, and further perpetuate lazy, entitled workers.

Look at Consumer Reports' reliability data, based on FACT, and it tells the whole story. The current CR story on Chrysler...number 38 out of 38 in reliability! They deserve to go under for allowing that to happen. GM and Chrysler management have supported their own fat paychecks, union control, and poor quality such that they are no longer competitive in a global market. People will buy quality and lowest cost of ownership - period. They're not going to buy junk - and CR confirms that GM and Chrysler are still selling inferior product. I fear for our country as more outside interests come in and take over our weakened companies. It's time for America to roll up their sleaves, work hard, and use their brains again!

[Jacqueline Miner]

My husband and I have GM vehicles. Some with close to 300000 miles on them. Just a good oil change and basic maintence. We use them for work and play and love them. The dealerships we have done business with are great and we have no commplaints. Heck we even have a couple of Fords. I hope the missmanagment of GM gets straightened out so we can continue to buy the good quality products that we have become accustomed to but I probably shouldn't hold my breath.

[Dave]

That's right, Greg. Blame it on Obama. Doesn't make you look bilious or ignorant at all.

[terry]

i am in the automotive repair industry the past 20 yrs.my appinion is you get more for the money in a big three vehicle.in aword they all produce junk in some way or the other.if you properly/religously maintanance your vehicle you can get good service out of all.

[summit]

buying a new car?? i guess this is not the right time to buy a NEW CAR if you have already then don't settle your mind in acquiring one.. it's a wrong investment right now many people tend to invest their money in real estate because in real estate there is no maintenance needed....

[Phil]

Since 1950 the U.S has spent trillions on the cold war, the Vietnam war,
the korean war, 2 wars in Iraq and a war in Afganistan.
I find it really hard to believe that spending this countrys' resources
like that hasn't somehow damaged our economy.
After WW2 I think Japan was only allowed to have a small army.
The U.S put american bases in Japan so that attacking Japan would
be like attacking the U.S and Japans defense was basically being
subsidized by the U.S.
The U.S spends 15 times as much as Japan on defense.
The 5 Trillion the Govt borrowed and spent in the last 8 years was probably more than enough to redesign all american cars and build all new manufacturing plants.
The money spent in 2 days in the Iraq would be enough for 20000 engineering scholarships. The money spent in another day would
be enouh to create an automotive engineering dept at every engineering
school in the country.

[Stratojet]

I have been with GM since 1980 and here's my view on reliability :

-Consumer Reports uses convenience sampling methods, i.e. only the subscribers answer. This statistical method is prone to a very important bias, since it does not represent all the population in the USA. Any serious stats teacher will confirm this.
- The 20 or so employees at CR in the auto group have way too much power on who will live and who will die (or already has).

- On a last note, here's the absurd theory: why would a subscriber to your magazine buy a GM car, when they were told in your magazine that they were mediocre (G6), miserable little car (Aveo), or the worst in class (Cobalt)?

I really wish that part of Chapter 11 would preclude CR from publishing or use Chrysler or GM data for their ratings. We would then see how the Asian brands fare compared to each other.

-

[Pete from New York]

There is no possible way to dispute that the big three have produced inferior quality, and that their marketing and marketing research has failed to produce cars people want to buy. All this while paying union wages that are nowhere near equitable given the skill level of the jobs (overpaid). This has, in every way, opened the door for foreign competitors.

The big three and their pork-barrel mentality made OUR bed and now WE all have to lie in it -- suffering through higher taxes, a weakened economy, and the probable demise of the US as a premier manufacturing entity.

We saw it coming in the 1970's, but the big 3 execs just golfed and sailed and buzzed around on their corporate jets, oblivious to the ramifications of their actions.

It is really quite pathetic. In my mind, they are no less criminal than Madoff.

[Carlton]

I once believed GM was the premier automaker in the US, not any more. For years they have been producing over priced and overly rated, poor quality vehicles with major defect's with a life expectancy of 20,000-50,000 miles and expect the consumer to foot the bill on repairs or buy another one. Recalls & Warranties Ha! they find every excuse possible to worm out of it when a major problem occurs. Warranty? they keep telling you there's nothing wrong while your under warranty, Extended? not everything is covered! that you were complaining about while under manufacturers warranty! Recalls? hummmmmm! was only to look at the parts not replace? failure? your part was newer than the designated recalled part, huh? but it failed, too bad it took to long to fail even if you only have 20,654 miles and it destroyed the engine so be a good loyal customer and by another one will you, we need gas money for the corp jets.