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Brandon Seiler's Blog on Cars

Red, white and Bailout

One of the main reasons we haven't seen Chrysler and General Motors completely disbanded is because the federal government has decided that it's in the best interest of our country to keep our giants of industry from toppling like Dominoes. 

With the feds taking a 60 percent stake in the new GM and calling many of the shots with Chrysler's restructuring process the quips are already coming in that President Obama is “A full-time president and a part-time auto analyst.” Others are going so far as to scream socialist and stock up on firearms, perhaps fearing what Reagan jokingly called the nine most frightening words in the English language:

“I’m from the government, and I’m here to help.” 

For many Americans these days, Reagan’s joke is proving to be more prophetic than funny. Especially when considered alongside 11 historic words spoken March 30th of this year by our current president: 

“Starting today, the United States government will stand behind your warranty.” (1)




Speaking of GM and Chrysler’s bankruptcies, this seems like a fairly good example of how taxpayer bailout money is being used to protect consumers, not just prop up massive corporations who would have collapsed otherwise. 

But if you dig a little deeper into the details, the plot thickens. The New York Times reports:

“People who already own a G.M. or Chrysler vehicle are not covered by this program and it also does not cover safety recalls, which can occur years after the warranty expires.” (1)

And there you have it. The government-backed warranty is intended to protect Americans who might feel reasonably uneasy about owning an American-made car produced by a bankrupt company, but as the details above indicate, the plan’s most direct benefit is to spur new domestic car sales while current Chrysler and GM owners could be hung out to dry. Adding to the possibility of such an unsavory occurrence, Chrysler plans to close nearly 800 dealerships while GM intends to “wind down” close to 1,100 of their own. (1, 2) That’s a lot of existing warranties that could go down with them and a lot of people that could be left holding the bill.

On the flip side of the coin, there are signs of hope in the auto industry and beyond that the worst of the recession might be over and our billions of dollars of taxpayer aid might have something do with it, whether we’re being dizzied by the spin doctors or not. 

The selling rate for new U.S. vehicles rose in May for the third straight month to 9.9 million, the best we’ve seen this year. That’s still well bellow the16 million annual average for most of the decade, but better than 2009’s low of 9.1 million in February. (3) 

Automotive News reporter Jesse Snyder believes that consumer confidence is up sharply in May. “It’s still too soon to be sure that a recovery is underway, but February could have been the bottom of the market,” he said. (3)

Snyder also reports that Ford and Toyota are both increasing their North American production schedules this quarter and next to meet anticipated higher demand. (3)

Adding to the sunshine, Chrysler actually saw its sales figures improve last month while it could have been viewed that they were wallowing in government-sponsored bankruptcy. (4) 

Point being, we’re beginning to see bright spots poke their way through the apocalyptic cloud that’s been hammering our auto industry to the brink of collapse. Still, it’s too early to have a toast to Uncle Bailout, or throw his drink out, liquor tax and all on speculation that his plans might become part of our problems. For now it would be smart stay optimistically skeptical, read between the lines and leave plenty of comments. 

Sources: 

(1) http://wheels.blogs.nytimes.com/2009/03/30/understanding-obamas-auto-warranty-plan/?hp
(2) http://www.autonews.com/article/20090525/ANA06/305259981/1197
(3) http://www.autonews.com/section/vidmedia
(4) http://www.autonews.com/article/20090528/ANA02/905289962/1197


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Brandon Seiler is a bonafide car guy, member of the Northwest Auto Press Association and proud Washingtonian. He covers the latest auto news, technology, and pretty much anything having to do with car culture. You don't have to like cars to read his blogs, you just have to be able to read.

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