# Actual results of Big Three bankruptcies? **URL:** \ **Category:** Great Debates\ **Created:** [December 12, 2008, 12:30am UTC](https://boards.straightdope.com/t/actual-results-of-big-three-bankruptcies/476800 "2008-12-12T00:30:58Z")\ **Posts on this page:** 7\ **Page:** 2
**Author:** ![Sateryn76](https://avatars.discourse-cdn.com/v4/letter/s/a88e4f/32.png) [@Sateryn76](https://boards.straightdope.com/u/Sateryn76)\ **Post date:** [December 12, 2008, 7:11pm UTC](https://boards.straightdope.com/t/actual-results-of-big-three-bankruptcies/476800/21 "2008-12-12T19:11:48Z")
> [@Merkwurdigliebe](#): > > So what is wrong with the Republican’s idea that chapter 11 would work? They seem to have a point with the airline industry. GM has been fucking us over ever since they took part in killing off the American streetcar. The more pain they feel, the better. > > But seriously? Why would chapter 11 not work? That’s all I want to know. The Republicans make it sound like it would be like it was with Delta. Are there specific reasons that make this different? What are they? This is also what I would like to see discussed. I work for bankruptcy attorneys, and I have seen many business go into an 11 and make it out the other side. It seems like a good plan to me - file an 11, get out from under those contracts, and try to rebuild. That’s what Chapter 11 is for… ---
**Author:** ![Tuckerfan](https://avatars.discourse-cdn.com/v4/letter/t/eada6e/32.png) [@Tuckerfan](https://boards.straightdope.com/u/Tuckerfan)\ **Post date:** [December 12, 2008, 7:19pm UTC](https://boards.straightdope.com/t/actual-results-of-big-three-bankruptcies/476800/22 "2008-12-12T19:19:31Z")
> [@Merkwurdigliebe](#): > > Look, the prices of cars will obviously go down without a covered warranty, the question is, by how much? That will depend upon a number of factors. One of which will be the perceived quality of the brand as a whole, as well as the quality of that particular model. Some models will retain more of their value than others. The ones which retain the highest amount of value, will be those that don’t have any comparable equivalent produced by the surviving makes. I would expect Corvettes to hold most, if not all, of their value. > [@](#): > > You guys make it sound like they won’t be worth a penny which just sounds ridiculous to me. They’ll _always_ have _some_ value, but it may be little more than that of scrap metal. > [@](#): > > There is obviously a large majority of it’s value tied up in the object itself. How much would an outside warranty cost, for example? Scrap metal prices have fallen dramatically from their recent highs, having a glut of cars that no one wants will only drive the prices lower. > [@](#): > > It would essentially be an insurance policy for your car. I would be willing to bet that in a three-year period, the average car-customer is not very likely to need much warranty repair. Warranties last much longer than three years these days. You also have the issue of recalls. Today, if it turns out that a component was defective, a car maker will issue a recall and repair the problem. What happens if its discovered that there’s a defect in one of the parts on a car that was made by a company no longer around? Recalls aren’t always for minor cosemetic issues, either, they’re often for safety or routine operation of the vehicle matters. Equally important, is the development of new technology and having a centralized source for evaluating if it is, in fact, _safe_ to use that new technology on an existing vehicle. The last year Studebakers were equipped with disc brakes, and when the cars were built steel belted radial tires were _not_ common on vehicles. Collectors of Studebakers have discovered, the _hard_ way, I might add, that putting steel belted radials on such cars causes vibrations which loosen the bolts holding the _brake calipers in place!_ Had Studebaker **not** gone tits up, they could have done a recall and fixed the problem, or at least advised people to not put steel belted radials on their cars. If the Big Three go under, expect to see similar things happen. > [@](#): > > Just how much of the price of a new car is a warranty worth? It is a price, and I doubt it is more than 25 percent. But will there be enough _demand_ for cars produced by a make slated to die to justify someone setting up such a program? And how do you convince people that the company running that operation is going to be around in a couple of months? Telling them that its underwritten by AIG is **not** going to do it, I’m sure. Getting the _government_ to do it, is probably not the best idea, either. Not that I think the government _couldn’t_ do it, but because people are already screaming that the government _doesn’t_ have any business shoring up the automakers. Do you think that they’ll change their tune if the Big Three start to go under? Bear in mind that the costs for letting just two of the Big Three die are estimated at [nearly $70 billion](http://www.greencarcongress.com/2008/12/analysis-conclu.html) and thats _without_ setting up programs to handle warranty/safety issues. ---
**Author:** ![Tuckerfan](https://avatars.discourse-cdn.com/v4/letter/t/eada6e/32.png) [@Tuckerfan](https://boards.straightdope.com/u/Tuckerfan)\ **Post date:** [December 12, 2008, 7:22pm UTC](https://boards.straightdope.com/t/actual-results-of-big-three-bankruptcies/476800/23 "2008-12-12T19:22:36Z")
> [@Sateryn76](#): > > This is also what I would like to see discussed. I work for bankruptcy attorneys, and I have seen many business go into an 11 and make it out the other side. > > It seems like a good plan to me - file an 11, get out from under those contracts, and try to rebuild. That’s what Chapter 11 is for… Surveys have shown that a majority of people will **not** buy a car from a company that has filed bankruptcy, even if the company has “merely” filed for Chapter 11. The Chrysler bailout in the 70s could serve as an _excellent_ model of how to do things, as the terms of the loans given to Chrysler were nearly identical to those under a Chapter 11 filing, they simply didn’t have the _label_ “bankruptcy” applied to them. ---
**Author:** ![Sateryn76](https://avatars.discourse-cdn.com/v4/letter/s/a88e4f/32.png) [@Sateryn76](https://boards.straightdope.com/u/Sateryn76)\ **Post date:** [December 12, 2008, 7:26pm UTC](https://boards.straightdope.com/t/actual-results-of-big-three-bankruptcies/476800/24 "2008-12-12T19:26:55Z")
> [@Tuckerfan](#): > > Surveys have shown that a majority of people will **not** buy a car from a company that has filed bankruptcy, even if the company has “merely” filed for Chapter 11. The Chrysler bailout in the 70s could serve as an _excellent_ model of how to do things, as the terms of the loans given to Chrysler were nearly identical to those under a Chapter 11 filing, they simply didn’t have the _label_ “bankruptcy” applied to them. Which surveys are these? I don’t disbelieve you, but I have never heard that before. In addition, is it possible that, by actually showing the Big Three getting their act together without taking taxpayer’s money, some people may have renewed faith in their ability to redesign and make a decent car? Particularly if that car isn’t priced above the market standard, because the contact costs have been cut? ---
**Author:** ![Tuckerfan](https://avatars.discourse-cdn.com/v4/letter/t/eada6e/32.png) [@Tuckerfan](https://boards.straightdope.com/u/Tuckerfan)\ **Post date:** [December 12, 2008, 7:35pm UTC](https://boards.straightdope.com/t/actual-results-of-big-three-bankruptcies/476800/25 "2008-12-12T19:35:34Z")
> [@Sateryn76](#): > > Which surveys are these? I don’t disbelieve you, but I have never heard that before. [CNW did one survey, according to the WSJ.](http://blogs.wsj.com/economics/2008/12/12/how-destructive-would-bankruptcy-be-for-big-three/) > [@](#): > > In addition, is it possible that, by actually showing the Big Three getting their act together without taking taxpayer’s money, some people may have renewed faith in their ability to redesign and make a decent car? Particularly if that car isn’t priced above the market standard, because the contact costs have been cut? The problem is that _without_ someone (or something) big (i.e. the Federal government, Warren Buffet, etc.) throwing their weight behind the car makers, its going to be hard to for them to dig themselves out of the mess. And if the folks at GM and Chrysler are right when they say they’ll be lucky to make it to the end of the month, they _don’t_ have a lot of time to get their shit together. ---
**Author:** ![Sateryn76](https://avatars.discourse-cdn.com/v4/letter/s/a88e4f/32.png) [@Sateryn76](https://boards.straightdope.com/u/Sateryn76)\ **Post date:** [December 12, 2008, 7:42pm UTC](https://boards.straightdope.com/t/actual-results-of-big-three-bankruptcies/476800/26 "2008-12-12T19:42:20Z")
> [@Tuckerfan](#): > > [CNW did one survey, according to the WSJ.](http://blogs.wsj.com/economics/2008/12/12/how-destructive-would-bankruptcy-be-for-big-three/) > > The problem is that _without_ someone (or something) big (i.e. the Federal government, Warren Buffet, etc.) throwing their weight behind the car makers, its going to be hard to for them to dig themselves out of the mess. And if the folks at GM and Chrysler are right when they say they’ll be lucky to make it to the end of the month, they _don’t_ have a lot of time to get their shit together. I just wanted to point out that the article with the survey goes on to point out that the evidence to back it up is mixed, at best. And, there’s nothing stopping the Senate from putting out a statement saying “This Chapter 11 represents the best of all worlds for the Big Three, and we stand behind them” or something to that effect. Or Warren Buffet or anyone else, for that matter. I have no survey to back it up, but I’d bet there’s an equal number of consumers who would never buy a Big Three auto if they got the bailout. People of all kinds are pissed as hell about this. ---
**Author:** ![Airblairxxx](https://avatars.discourse-cdn.com/v4/letter/a/f9ae1b/32.png) [@Airblairxxx](https://boards.straightdope.com/u/Airblairxxx)\ **Post date:** [December 12, 2008, 7:53pm UTC](https://boards.straightdope.com/t/actual-results-of-big-three-bankruptcies/476800/27 "2008-12-12T19:53:13Z")
> [@Tuckerfan](#): > > The Chrysler bailout in the 70s could serve as an _excellent_ model of how to do things, as the terms of the loans given to Chrysler were nearly identical to those under a Chapter 11 filing, they simply didn’t have the _label_ “bankruptcy” applied to them. Agreed. Detroit is hampered by the fact that their cars aren’t much in demand any more. A primary cause of this is the perception that their cars are crap. However, at this point in time Ford’s cars are generally thought of to be on par with Japanese imports. And GM isn’t too far behind. Chrysler, however, is probably doomed. I don’t think that analogies to the failures of previous large companies, or of the American steel industry, are really appropriate. I think what we’re talking about here is the failure of an entire industry that produces differentiated products (as opposed to a commodity like steel). The loss of this industry means the loss of intellectual capital, like brands (which are pretty damaged already), as well as the loss of skilled production capacity as the companies’ suppliers go under due to lack of payments from the Big Three. I’m of the opinion that this is an unprecedented crisis in American economic history. [Previous page](https://boards.straightdope.com/t/actual-results-of-big-three-bankruptcies/476800.md?page=1)