There has been a lot of speculation (again) recently about General Motors (GM) filing for chapter 11.  Reports suggest that the company would use this form of bankruptcy protection so that it could liquidate undesirable assets and renegotiate contracts.

Of course, these are all things it has been trying to do over the past few months, a period during which it has received substantial funding from the US government ($17.4 billion was divided between them and Chrysler).  It’s worth noting that, according to some reports, only around 10% of companies manage to reorganise successfully.

Naturally, my interest is the potential reaction of consumers if GM did file for Chapter 11 rather than the politics of bailing out companies.  That said, I will add that giving a huge amount of money to a group of people who have demonstrated that they can’t run a business well seems a little, how shall I put it, optimistic. 

I suspect that the consumer reaction to a GM in Chapter 11 will depend primarily on the dealership network to maintain consumer confidence.  If they can reassure customers that they will be able to provide the long term after-sales support that they will need then it need not be a complete disaster.

However, the perceived risk of buying a GM car will increase for consumers.  The media stories surrounding a Chapter 11 filing are likely to focus on the negative elements of the company’s past; cars that were recalled, cars that didn’t sell well, pr0ducts that were out of touch with changing market tastes, and the strength of competitors.  Such reminders are not conducive to driving sales up, and are likely simply to increase anxiety about buying the brand.  The unconscious mind will be asking itself, “Having heard all that, if I bought one now and it went wrong, how stupid would I feel?”

Experience from the UK of Rover going under gives some clues about what consumers might expect: bargain prices, problems getting spare parts and mediocre cars.  To be fair the cars were mediocre before the company ran into problems, hence the difficulty getting people to buy them at profitable prices and the spiral into loss!

Chapter 11 will mark a significant step towards the end of General Motors.  Consumers will have good reason to be wary of buying and no shortage of reminders (through the media and discussions with friends) that buying a GM car is an unjustifiable risk; GM car dealers will be the last line of defence.

Philip Graves


  1. admin

    @Anthony Lemme
    “…this is what happens when you suck. You lose.”

    Hilarious and true.

    If only one of the many consultancy firms they’ve no doubt employed over recent years could have delivered such a succint analysis of their situation!


  2. Rob Northrup

    Bankruptcy is the only way they can renegotiate their ridiculous union contracts. The unions are what drove them into the ground with their impossible demands and feathernested retirement plans. With that said, the executives did sign off on these contracts altho they had little option.

    I know Chrysler is on the brink as well as GM. Should provide an opening for Ford. If people are buying fewer cars, it stands to reason that we need fewer car companies…

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  3. jc mackenzie

    Interesting….as I write this, Chrysler is within a breath of filing for protection and there is additional talk of a merger.

    I’ve lost track of the massive amount of money that has been fed to these companies already….is it me or does it make sense to pump so much capital into institutions that not only produce products that few buy, but seemingly have no concrete plans to do anything really differently?


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  4. mark mallen

    My question is, “Why should any company be bailed out” These companies are public companies with ridiculous salaries and overpaid UNSKILLED workers.I lived in a town with a GM plant.
    I used to play basketball with a person whose job was to be there in case someone became sick. He was paid 8 regular hours and an overtime hour each day. he said he slept an average of 7 hours a day. Both my father and grandfather were union workers but what is right is right and what is wrong is……bailed out by the government. Mark

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  5. Duane Cunningham

    Why give the public’s money to a company that has clearly demonstrated over a long period of time that it is incapable of managing its finances and makes a shitty product!

    Nobody would come bail out my pop’s store or Mark’s Ice cream stores if he was incapable of managing them properly!

    Its criminal!!


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  6. Pam Schulz

    Instead of it being General Motors – we refer to it as “Government Motors.” Billions after billions flushed down the toilet and we’re still at the same point we were years ago – the company has an unsustainable lust for cash becuase they entered into contracts that could never be sustained. The government should have let the free market determine the outcome of this one!

    And we expect different results if we let these clowns run our health care…??? GEEZ!!!

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