Now that General Motors Corp. has filed for bankruptcy, the federal government has stepped in, taking a 60 percent stake and making the new GM effectively owned by U.S. taxpayers. So now that you are an unwitting owner, does it make sense to buy a car from one of GM’s remaining brands?
While many may hesitate, it’s certainly safe to buy a GM car. GM is not going out of business. It’s reorganizing under Chapter 11 bankruptcy. When GM emerges, it is hoped by September, it will be a new legal entity that still builds and sells cars.
Details of the new GM are already emerging. Here’s how the new GM could affect consumers.
Although GM has said it will close about 20 percent of its dealerships, it still will keep 3,600 stores open. By comparison, that’s more than double the 1,470 Toyota dealerships nationwide. So while you may have to drive farther to a dealer, it’s not likely you’ll have to go too far.
GM also has said it will close 14 more factories, but its restructuring calls for increasing the number of vehicles built in the U.S. Right now, about 67 percent of the cars that GM sells in the U.S. are built here, according to the automaker. It projects that U.S. production will increase to 70 percent by 2014, says Gary Cowger, GM’s group vice president for global manufacturing and labor relations. The increase will mark the first time that production volume here will increase in more than 30 years.
Among the vehicles to be built in the U.S. is a new subcompact car. The automaker had told Congress that it planned to produce up to 51,000 subcompacts per year in China and ship them to the U.S., starting in 2011. That’s when GM plans to start selling the Chevrolet Spark here. The three-door hatchback with a 1.2-liter turbocharged engine is about the size of a Honda Fit or Toyota Yaris.
But United Auto Workers President Ron Gettelfinger has told the Associated Press that GM will build the cars in the U.S. in a concession to the union.
While the new GM will be a dramatically different company and, in many respects, one that is able to do business more efficiently, it’s easy to understand why shoppers would view GM brands hesitantly: the cloud of bankruptcy is still overhead. Still, if you’re interested in one of GM’s models, there’s little reason to be concerned, at least with the brands that remain under the GM logo.
The company has said the new GM will keep its Chevrolet, Cadillac, Buick and GMC brands. The Penske Automotive Group is under agreement to buy Saturn, including its parts, inventory and dealer network. Under the deal, GM will build the Saturn Aura, Vue and Outlook for two years. Penske has said it will outsource production for additional models. GM also has a deal to sell Hummer to a Chinese producer of construction machinery. The new owner intends to operate Hummer’s business in the U.S. and wants to improve Hummer’s fuel efficiency, according to the AP.
Saab, another GM brand, is up for sale and has three interested buyers, GM says. GM had said it would discontinue Pontiac, but it recently backtracked. Now, it will entertain offers to buy the brand. Making Pontiac a success would be a challenge — it doesn’t have its own dealer network. Most Pontiac dealerships are cobranded with Buick and GMC.
Regardless of the fate of each brand, the Obama administration has guaranteed that all warranties will be honored, and a $5 billion government allocation for auto suppliers will ensure that suppliers will continue to make necessary parts for GM vehicles, even if the brand is jeopardized.
While it’s unlikely GM dealers will start offering fire-sale prices on their vehicles, GM already offers substantial incentives on its vehicles, including customer cash, owner loyalty bonuses, and special prices for some credit union members and for consumers in certain regions of the country.
Although there are thousands of dollars to be saved by buying a GM vehicle now, with the company in bankruptcy, many analysts believe that GM cars will depreciate faster. So your car’s resale value may be compromised when it’s time to sell.
Tara Baukus Mello is a freelance writer who has written about automotive topics of interest to consumers since 1995. If you have a car question, e-mail it to us at Driving for Dollars.
If you have a car question, email it to us at Driving for Dollars.