Buying CTS-V with GM 's Bankruptcy Potential?

[//ZZ//]

Question: What are your thoughts about buying a new car (CTS-V) from a car company that has a potential for bankruptcy?

I'd love to buy a new CTS-V, my dealer has one ordered to my specifications and I have the first option (but no obligation) to buy or not.

All the talk about possible bankruptcy for GM, especially if a bailout is not offered (even if it is offered I'm not sure it is any long term fix), has me nervous. Although many suggest bankruptcy and restructuring under Chapter 11 may be one of the better options, if GM cannot qualify for DIP financing (debtor-in-possession), and some experts and some at GM feel they may not, then Chapter 7 and liquidation may be the only option and an end to GM. A recent survey of car buyers revealed 80% would never consider buying from a bankrupt automaker.

Although a guarantee of third party warranty coverage would be helpful, my real thought would be plummeted resale value should one ever wish to sell it. I'm hoping a great deal could be had, and keeping it long term may soften the depreciation blow. Even at that, I'm wondering about sitting tight for awhile and see what pans out. Some are speculating a bailout may not pass at present and they may push this out to the new administration. Not sure if GM will make it that long with cash depleted.

Am I alone being nervous about this? Wondering what some of your thoughts are on this matter.

Would you buy a car from an automaker that is or has a real potential to go bankrupt?

Thanks.

[OzarksHillbilly]

You're not alone in wondering/worrying about the possible effects of a GM bankruptcy, however unlikely that may be.

At the moment, I'm questioning the wisdom of the extended GM warranty I purchased this summer for my '05 V.

I remain hopeful that a solution to the financial crisis can be worked out that will keep GM in business. But in the meantime....

[Art138]

Quote"A recent survey of car buyers revealed 80% would never consider buying from a bankrupt automaker." I believe that depends on the manufacture; GM is on pretty solid ground overseas....I was just in Brazil and Mexico and albeit a slower market their market share is competitive. The main problem is in the U.S where the cost conversion is high partly due to past agreements with the unions. If it files for chapter 11 it will continue to produce only selected cars. If demand for the V is high enough then it will be made under a chapter 11 model. There will always be some outsourced arrangement to get the car service as a worst case scenario. I would buy it........

[Cadillac Tony]

We're getting asked these questions a lot at work right now. A LOT.

In my personal opinion, I don't see America letting GM go out of business- I just don't. Anyone except the most die hard anti-American-car people can see the ripple effect that GM tanking would have on the entire industry, let alone the American and world economy (yes- GM's business keeps a lot of foreign suppliers in business as well- it's not just American companies that would be affected). Aside from those shortsighted people, everyone including the Government knows what would happen, and it isn't pretty.

The shame of it all is that GM has been taking steps over the last few years to reduce its operating costs, streamline production and improve product, all with the goal of profitability by 2010. The plan was going great until the Casino - er, I mean- Wall Street, suffered this colossal meltdown that literally gutted the auto industry from the ground up. A lot of foolish people on blogs are crying "GM brought this on themselves", but the reality is that their restructuring was going quite well until this calamity hit.

I see no possible future that includes the Government standing idly by while our last great American industry burns to the ground (partially because of the sub-prime crisis caused by Washington lawmakers, not the automakers, I might add).

[CIWS]

The government will not allow GM or Ford to go out of business. They may sit back and allow Chapter 11, although I'm leaning toward that not happening at this time, but if they let them go completely under in the next couple of years the economic repercussions would be too dramatic. At that point anyone's warranty will be the last thing on our minds.

[Jpjr]

Originally Posted by CIWS

The government will not allow GM or Ford to go out of business. They may sit back and allow Chapter 11, although I'm leaning toward that not happening at this time, but if they let them go completely under in the next couple of years the economic repercussions would be too dramatic. At that point anyone's warranty will be the last thing on our minds.

I like how the governor of Alabama keeps going on TV saying the Big 3 should declare BK and fail. Strange coincidence that he has Japanese auto plants all over his state.

I also like how the rich execs on Wall Street are also pushing for a Big 3 BK, even as they take bailout TARP money from the government.

Lets hope Obama and Co. stick up for the American automakers and keep American autos and jobs in tact. A spade is a spade, GM would be out of business if the existing regime were sticking around.

[Jpjr]

Originally Posted by OzarksHillbilly

You're not alone in wondering/worrying about the possible effects of a GM bankruptcy, however unlikely that may be.

At the moment, I'm questioning the wisdom of the extended GM warranty I purchased this summer for my '05 V.

I remain hopeful that a solution to the financial crisis can be worked out that will keep GM in business. But in the meantime....

My biggest concern with the V2 is not warranty (which would be guaranteed via BK).

My biggest concern is that CAFE shoots to 50mpg as a condition for bailout $$ and the V2 goes away. That would make parts very rare and expensive, especially since the LSA is not on any other vehicle yet and may never be.

[cavemantrader]

"The plan was going great until the Casino - er, I mean- Wall Street, suffered this colossal meltdown that literally gutted the auto industry from the ground up."

People who live in glass houses shouldn't throw stones!

GMAC has always been a big part of GM, and was frequently a larger contributor to the bottom line than the actual automobiles.

Ditech mortgage was a large part of GMAC during the housing boom times. Yep, GM caught the housing / mortgage boom, etc.

And maybe using 0% financing since October 2001 to force sales rather than reducing production was not the correct answer in the end. Did GM truly believe that a production rate of 16 or 17 million (for the U.S. market) was sustainable?

Am I impressed with the CTS-V and some of GM's other models. Sure, or I would not be here on this board. However, an unhappy ending might be unavoidable, whether it is now or 5 years down the road.

[BaseBoy]

The vast majority of V2 buyers are not purchasing V2s as a collector's item, but as a daily driver. Normally, one would expect problems with a new high performance car in the first model year. With the V2, there is a new powertrain and new electronics. Remember that many V1 rear differentials failed in the first year. Remember that oil pumps in the new E60 M5 failed. And there have been significant powertrain problems with new 911s. Thus, V2 owners very much need GM employees to be at work. They very much need suppliers to continue to supply parts.

There is one factor weighing in favor of the V2: It supposedly was built to handle the 500+ HP. Thus, if a driver does not spank a V2 repeatedly, the V2 should be expected to hold up well as a daily driver.

It is quite possible that V2 owners will have unusable bricks if a part fails for which there is no stock replacement. GM easily could shut down entirely for 3-9 months during a reorganization. Sure dealers would still repair cars -- for cash money -- as GM may not reimburse dealers for warranty repair during some period of a reorganization. (MPC went bankrupt recently, rendering my computer warranty worthless for the foreseeable future. No parts. No service. Only 1 person answering the phone.)

Consider too an unfortunate collision. Is there an existing supply of body parts to repair V2s? Does your insurance cover a rental for months on end? Does your insurance policy total a car for which there are no replacement parts?

What about recalls, such as the recent CTS airbag recall? What if GM is not around to recall V2s? or not around for 3-9 months during a reorganization?

Then there is resale value. Clearly the V2 is a phenomenal deal at $60k -- if it has a full powertrain warranty and a company standing behind the car during the warranty period. Without the company standing behind the V2, it is probably worth significantly less -- at least for those looking for daily driver instead of a collector's item. Compare with the new M3. Fully equipped at $70K, the M3 is more expensive than the V2. But one can be absolutely certain that the M3 will be repaired under warranty and will retain much of its value. Search cars.com for used M3s (or used M5s). If -- and that is a big "if" -- Cadillac planned on winning over potential M3, M5, etc. buyers, it should have a much more difficult time doing so when the fate of the company is in question. Why take a chance on having a brick? Why take a chance on a potential orphan?

Buy American. Yes, I never would have considered buying an import -- or even a Ford -- so long as GM was viable (and sending pension checks to family members). (Past CTS owner; current SRX owner.) But it is really asking a lot for us Buy American folks to take a chance on a new, expensive GM performance car given the current uncertainty. There is loyalty and then there is foolishness.

[Uncle Meat]

Personally I think that chapter 11 is the only way out for GM. If the government gives them a loan it's just putting off the inevitable. A couple billion $$ will what, keep them up and running for 6-9 more months? So you think GM is going to fix all their problems and become self-sustaining in just 6-9 months? Doubtful.

Filing for chapter 11 and dumping the unions is the only way that I see GM making it work. The reason the big three can't compete is because the unionized workforce adds too much $$ to the overall cost of our cars.

As for the OP's question... I wouldn't worry too much about it. Whether they get the hand out from Uncle Sam or the reorganize under chapter 11 I think you're safe.

U.M.

[caddiedrummer]

The problem is the same people who caused the problem are trying to fix. What did Harry Reid say yesterday something like we could fix (the car industry) overnight with the stroke of a pen . He is either deceitful, naive or both.

If you give GM or Ford $50 or $100 billion they will just burn through it. I hate to say it they either need to figure it out on their own or take 11. If you do it for them where does it stop and it becomes totally unfair. Also down the road any time GM is in crisis they will just firgure the tax payer will bail them out.

I will admit GM has tried and I like Wagoner (he went to our rival HS here in Richmond and played B-ball) But, the company has reacted too slowly and been way behind the quality curve. Just when it has almost caught up they are on the brink--true irony.

How about a 5% tax break for anyone buying a car before end of 08??

[CIWS]

There's already 25 billion set aside to give the Big 3 to help them develop and field alternative fuel / fuel efficient vehicles. Even if the initial vote this week is a No to tap the 700 Billion fund, there's a new Administration and Congress coming who's more sympathetic to them who could re vote the support after January or they could figure out a way to go ahead and fund them from the 25B already set aside. The point being they are far from gone, it's really just more of a question how it will occur and the form it will take. Odds are most owners won't keep their cars 5-6 years, and GM has at least that much life left in them between a possible Chp 11 and/or Uncle Sam's assistance.

[CIWS]

Originally Posted by caddiedrummer

How about a 5% tax break for anyone buying a car before end of 08??

How about any "loan" to the big three comes with a stipulation that any actual taxpayer who filed a return and actually paid into the tax base can purchase ANY 1 automobile they sell at dealer invoice. Everyone still makes money, and the average joe taxpayer gets a good deal on one car they sell if done in the next three years. That gives enough time for those who just got into one to pay it down, finish most leases, and for the alternative fuel cars like the Volt to get to market.

[Cadillac Tony]

Originally Posted by cavemantrader

People who live in glass houses shouldn't throw stones!

GMAC has always been a big part of GM, and was frequently a larger contributor to the bottom line than the actual automobiles.

Ditech mortgage was a large part of GMAC during the housing boom times. Yep, GM caught the housing / mortgage boom, etc.

And maybe using 0% financing since October 2001 to force sales rather than reducing production was not the correct answer in the end. Did GM truly believe that a production rate of 16 or 17 million (for the U.S. market) was sustainable?

#1- I don't work for GMAC, so I don't live in that "glass house"

#2- The Government has been pressuring and requiring Mortgage companies to give loans to people who can't afford them since the Clinton Administration, so it's not like lenders just up and decided to do it. GM also sold 51% of GMAC in April 2006, during the height of the housing boom- perhaps they saw this coming?

#3- The American public and the Government should have been kissing GM's collective butt after September 11th when they came out with the "Keep America Rolling" program- 0% financing across the board. It was the first time an automaker had ever done something like it, and a large part of the reason we didn't dive into a recession in the weeks after 9/11. How much do you think it cost GM to do this? American buyers and the media returned the favor by continuing to buy foreign and lambaste GM at every chance they got.

[Vrocks]

Originally Posted by Cadillac Tony

We're getting asked these questions a lot at work right now. A LOT.

In my personal opinion, I don't see America letting GM go out of business- I just don't. Anyone except the most die hard anti-American-car people can see the ripple effect that GM tanking would have on the entire industry, let alone the American and world economy (yes- GM's business keeps a lot of foreign suppliers in business as well- it's not just American companies that would be affected). Aside from those shortsighted people, everyone including the Government knows what would happen, and it isn't pretty.

The shame of it all is that GM has been taking steps over the last few years to reduce its operating costs, streamline production and improve product, all with the goal of profitability by 2010. The plan was going great until the Casino - er, I mean- Wall Street, suffered this colossal meltdown that literally gutted the auto industry from the ground up. A lot of foolish people on blogs are crying "GM brought this on themselves", but the reality is that their restructuring was going quite well until this calamity hit.

I see no possible future that includes the Government standing idly by while our last great American industry burns to the ground (partially because of the sub-prime crisis caused by Washington lawmakers, not the automakers, I might add).