What GM’s Bankruptcy Means to Consumers

The company's troubles won't affect drivers too much in the short term, but car owners should expect to encounter service obstacles down the road.

By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance

June 2009

General Motors filed for Chapter 11 bankruptcy on June 1 but will continue to do business during the restructuring—and hopes to emerge as a stronger, new GM within 60 to 90 days. “The remarkable thing about all of this is how unremarkable this will be for the typical consumer,” says Jack Nerad, executive market analyst for Kelley Blue Book. “It will be pretty seamless.”

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Expect to encounter some obstacles down the road, however. Here’s what GM car owners concerned about their service, warranties and loans need to know:

Service on your GM car

General Motors will continue to operate during the restructuring, and remaining GM dealers will still service GM vehicles—including Pontiac and other brands that may cease production—and honor GM warranties. Parts for all makes should remain available for a while.

“There are a lot of these cars on the road, and suppliers will continue to make the parts,” says Patrick Olsen, editor in chief of Cars.com. “But over the years, the availability will decline as the number of these cars on the road declines.”

If your local dealer closes, you may need to travel much farther for your service. Olsen expects some former GM dealers to stay open as independent dealers who may continue to do servicing, but it’s important to find out whether they’re certified to do warranty work.

Warranties on your GM car

General Motors will continue to honor its warranties, a request it made to the bankruptcy court. And the U.S. Treasury Department has offered to back warranties for any GM vehicles bought during the restructuring period. That means if the company doesn’t ultimately emerge from bankruptcy, the government will pay for service on those cars.

GMAC loans

GMAC is a bank holding company that is a separate legal entity from General Motors. “GMAC has not filed for bankruptcy, nor do we intend to,” says GMAC spokesperson Gina Proia. Your loan terms will remain the same, and you’ll continue to pay your bills to the same place. (Yes, you still have to send your payments in on time.)

GM credit cards

GM asked the court to maintain the GM credit-card program. Customers can continue using their cards, and “we intend to continue honoring customers’ GM card earnings,” says GM spokesman Tom Wilkinson.

OnStar

GM says that its OnStar service will continue uninterrupted and your OnStar subscription will remain in place.

The Restructuring Plan

General Motors hopes to keep its core brands in the New GM—such as Buick, Cadillac, Chevrolet and GMC—and shed less-profitable brands such as Hummer, Saab and Saturn. The company has already announced that it will stop producing Pontiac cars in the next few months.

GM announced in late April that it planned to reduce the number of dealers from 6,246 to 3,605 by the end of 2010. More than 2,000 dealers (most of them up for renewal next year) have already received warning letters saying their franchise agreements won’t be renewed, says Patrick Olsen, editor in chief of Cars.com. And the schedule will be accelerated because of the bankruptcy filing. “We will begin wind-down negotiations with dealers this month,” says GM spokesman Tom Wilkinson. “The franchise agreements don’t expire until October 2010, but we would like to work with dealers to wind down earlier when possible. Each case will be different.”

For more information, visit GM’s restructuring Web page or call 866-405-4005.

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