I am thinking of buying a non-GM new car. If GM fails, people will try to get rid of everything GM as there is no warranty, and many will anticipate a part shortage.
Does this quickly drive up the cost of other cars (Honda, Toyota, VW etc.)?
Is now a good time to buy a non-GM car?
I wouldn’t be surprised if you saw the prices of non-Big Three cars rise. Part of it will come from increased demand, but part of it will come from the fact that they can demand higher prices. Less competition generally means higher prices, and non-Big Three car makers can claim that their cars have a greater “value” than their Big Three competitors. In the short term, however, the Japanese and Germans might very well cut their prices, as a way of driving the Big Three out of business.
A reduction in supply of new cars would likely lead to an increase in prices unless it’s offset by a corresponding drop in demand. If GM survives, however, we will still see a reduction in supply as GM and other companies trim the turkeys from their product lines. Either way, car production looks set to fall.
The Big Three execs have stated that they expect demand for new cars to drop by almost half in the coming year. Given that the industry as a whole is plagued by overcapacity, we can look to see cuts across the board, even if the Big Three survive.
They do not think they should plan on never selling a lot of cars again. We know the economy has been blown up. We know it is hard to get auto financing. If you believe that it is not permanent and that there will be pent up demand ,you have to have the ability to expand capacity.To eliminate all excess capacity would be agreeing that America will never recover from this financial mess.
Is it a given that the company going bankrupt means the warranty is void? This is an honest question, as I don’t know.
Bankruptcy does not necessarily mean that the company will cease to be. Kmart is still around, as are United Airlines, etc.
Bankruptcy does not it mean it will exist. Check the textile industry. It is off to 3rd world countries. We wont be 3rd world for another 20 years.
Warranty claims usually become an unsecured debt against the company, thus one more creditor asking the bankruptcy court for their money.
And they are down the list, below employees owed wage, ex-employees owed their pension, suppliers owed for the parts they provided, etc. But they are higher on the list than stockholders.
In practice, what happens is that dealers & other repair shops become very reluctant to do warranty repairs – understandably, they aren’t sure they will ever get paid for them. (Dealers are probably already owed large sums by the company.) So they may decline to do the repair unless you pay for it up front, and then you have to file a warranty claim with the auto company and wait for them (or the bankruptcy court) to pay you.
Some will see them as collectors items and stick one in a garage for 20 years.