A lot of people are afraid to buy an American-made car right now, because they’re afraid the auto makers will go bankrupt. And, as many know, in a bankruptcy, any obligations of the company can be scrapped… from gift cards, to union contracts, to warranties.
Now, some will say that the Obama administration won’t let the Big 3 fail. The argument there is that the Administration will do whatever it takes to bail out the Big 3, in order to keep the lucrative union contracts alive. Of course, if McCain had won the election, others would be arguing that the Administration would keep the auto maker’s alive for their national defense assets. If World War III were to break out, American auto makers would be called on to be tomorrow’s war factories.
I really don’t care either way. I just want to be able to buy a Volt in 2010… provided that the economy isn’t still in the crud, and that it ships with an emergency mode. So, to prevent there from being issues with that, I propose that the Big 3 contract insurance companies to underwrite their warranty policies. That way, when you buy a car, you also get an insurance policy in your name that covers the warranty. Since it’s in your name, if GM, Ford, or Chrystler go bankrupt, the insurance company will have to pay out for each warranty claim.
Now, you might be saying “Chris, these companies don’t have the money to do that.” Well, they really can’t afford not to, in my opinion. Some have proposed that the federal government do this underwriting. I don’t think that’s a good idea, for all the same reasons that I don’t want government to be my doctor… I don’t want them to be my mechanic either.
Also, using some of those bail-out dollars to underwite policies for each new car, would put money back into private insurance… rather than adding more to our national debt. Does that mean GM may have to cut their 100,000 mile warranty to 70,000? Sure. Does it mean Chryster won’t be able to pull one of its oh-come-on “lifetime” powertrain warranties? Yep. But, does it mean folks won’t be afraid to buy an American car? I think so, and that’s why I think the Big 3 should be focus grouping this idea right now.
Hey, SquareTrade might even underwrite it 🙂
Haha, nice one Chris. Although… there’s another fundamental problem… which is, if GM goes under, its suppliers will go under. If its suppliers go under, who will provide the parts for the repairs in the future, even if it’s Allstate that’s paying the bill?
Being a SquareTrade employee, a Detroit native, and a product of a GM family, I wish we could!!!
Jill
The event that part suppliers “go under” is not even in the cards really.
The reason the Big 3 are going bankrupt, is that they are having to pay operating costs significantly higher than the foreign competition. Under Bankruptcy, the Big 3 would get to start over with a clean slate.
Nobody is really predicting that the Big 3 would be unable to exit bankruptcy as functional companies, though some are calling for two of them to merge (GM and Chrysler, for example).
And, even if the part manufacturers were to go under, others would happily produce aftermarket parts. Even if the Big 3 went under, the cars they’ve already built and sold aren’t going to vanish… there’s always an aftermarket, even if the company behind those cars ceases to exist.