In psychological terms, context is almost everything. Much as we like to think that we know how we will act and react in a given situation, without the richness of...
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.