What happens to my Warranty if a company goes bankrupt?

[sarcasmo]

I heard someone mention the word warranty during these hearings, but didn't get a real response. We have a 100,000 mile Warranty on our Saturn vehicle, if they get shut down, will we have a warranty left?

[kiva]

1. Yes, please, I'd also like to know this. n/t

[sarcasmo]

4. I feel if said company goes bankrupt and they don't honor the warranty

You should be able to drop said car off at the dealership.

[Taverner]

2. It goes bye bye

[youthere]

3. You're screwn.

[ben_meyers]

5. It would depend on what a bankruptcy court decides

Fighting chance they would be left pretty much alone, like frequent flier miles when an airline goes chapter 11.

[sarcasmo]

7. I will be returning the car to the dealerships door step if this happens.

[SoCalDem]

11. It will be an empty building

[sarcasmo]

23. I am afraid you are correct.

[T Wolf]

29. Return the car, at a high rate of speed, to the dealership OWNER's home. Right through

the picture window.

[sarcasmo]

30. Nice, I will see a Psychologist prior to taking your advice, LOL.

[TechBear_Seattle]

6. It depends on who is responsible for the warranty

If it is a manufacturer warranty, you are probably up a river of solid waste with insufficient means of locomotion. If the warranty is specifically with the dealer, it should remain good so long as the dealer remains in business.

[firedupdem]

8. I think it would be no good at all. If there are no more suppliers

available to supply the parts you need then your warranty is garbage. I lost my automotive job a year ago and have lots of friends and family hanging in the balance. It's amazing to me how the banks can get a fucking bail out but the auto industry can't get a loan!

[sarcasmo]

15. It has angered me too. Money for Bank, no problem. Money for the rest of us, big problem.

[SoCalDem]

9. s.o.l...unless a secondary insurer takes over the warranty..n/t

[riqster]

10. BOHICA nt

[yodoobo]

12. Nothing in ch.7. In Ch.11 it depends

If the automakers liquidate, which is highly unlikely, then the warranty is worthless.

If the automakers choose to reorganize, which is a virtual certainty if they go bk, then it depends on what the BK trustees decide is the best action for both the automakers and creditors.

A good case can be made, that the creditors and automakers will be better off honoring the warranties, as abandoning them would hurt the company further, causing the creditors to receive even less repayment.

A good example of this was Delta Airlines. When they filed bk, everyones frequent flyer miles were at risk of being lost. However the BK courts decided to let Delta honor those as it would hurt creditors more if they canceled them all and lost more customers.

IMO, its very unlikely that warranties will be canceled.

[Romulox]

13. In a Chapter 11, the automakers will undoubtedly back the warranties

To not do so would hurt business going forward, and thus, would not be in the creditors' best interest, either.

[amandabeech]

35. The more important question is whether a Chapter 11 would turn quickly into a Chapter 7.

First, if any automaker goes into Chapter 11, it must secure debtor-in-possession financing to keep going while it reorganizes.

There are some in Congress who might be willing to go along with that rather than give the automakers money up front. Unless this recession goes away really quickly, it is highly unlikely that there will be any private DIP financing available. NO DIP, No Chapter 11, and Hello Chapter 7.

The second problem is whether anyone will buy vehicles once an automaker goes into Chapter 11. Recent surveys suggest that 70% of consumers would hesitate to buy a vehicle from a company in Chapter 11. Buying a car is a huge long-term investment in something that is absolutely necessary for survival in most places in the U.S. now and in the immediately foreseeable future. Most people can get to work or to the grocery store without an airline ticket.

If no one buys the vehicles offered by a Chapter 11 automaker, then the down elevator will go extra fast to Chapter 7.

In the current economic crisis, avoiding Chapter 11 would be best. What needs to be accomplished is a reorganization like what would be done under Chapter 11, but by doing it through agreements with creditors and the UAW. Back in the days when I was practicing corporate law, it was called a "Composition Agreement," and could be done with less fuss, less time and lower legal fees. Hopefully, GM and Chrysler can do something like that. Ford is in better shape, and can hang on longer so long as the recession doesn't last more than a year or year and a half.

[Romulox]

36. Implicit in this whole scenario is that feds would supply the financing.

"In the current economic crisis, avoiding Chapter 11 would be best. What needs to be accomplished is a reorganization like what would be done under Chapter 11, but by doing it through agreements with creditors and the UAW. Back in the days when I was practicing corporate law, it was called a "Composition Agreement," and could be done with less fuss, less time and lower legal fees. Hopefully, GM and Chrysler can do something like that. Ford is in better shape, and can hang on longer so long as the recession doesn't last more than a year or year and a half."

The GOP and various anti-labor Dems are pushing a "prepackaged bankruptcy" which would amount to much the same thing.

[amandabeech]

37. Yes, I know. After yesterday's show in the Senate, I'm not sure that

I'd counting on it, although it appears that things are going better today.

The problem with going into Chapter 11, even with government financing, will be getting buyers to trust that the warranty, service and parts will be there four years hence. You know how much people trust the government. And its still Bankruptcy.

Look, I'm from Michigan originally, and most of my family and a lot of my friends are back there and are affected. I'd like to go home to be closer to my elderly Mom and her bachelor brother, but with the job market the way it is . . .

I'd really rather see them avoid Chapter 11, if at all possible. I see it as a HUGE stigma that will send more folks into the Toyota showrooms.

If staying out isn't possible, then a prepackaged would be the best deal, but I don't think that it is a great one.

[kiva]

17. Thank you. n/t

[amandabeech]

38. You're welcome! n/t

[TahitiNut]

14. More interesting would be how Recalls would be handled.

[sarcasmo]

16. A bankruptcy opens up such a big can of worms.

[hoplophile]

18. Absolutely nothing. Good luck finding a dealer to honor it though.

[sarcasmo]

21. This is my fear.

[yodoobo]

26. Thats actually an interesting point

The big 3 will most likly want to continue honoring their warranties, and the bk courts will most likely approve it. This is good for all parties involved to prevent further damage to the creditors.

However, GM doesn't administer the warranty program directly. Its done through dealers.

When you get your car fixed under warranty, the dealer files a claim to the automaker for reimbursement.

If dealers are nervous about getting paid, it could be a problem finding a dealer to do the warranty work.

Heck that could start as soon it becomes clear that no bailout is forthcoming and a bk is on the -horizon-

[TexasObserver]

19. Your warranty is a contract, and as such, will be voided.

You will be able to make a claim in bankruptcy, but that's a right without much use.

If the company files chapter 11 and comes out with a plan, then you might have warranty coverage, but that could years down the road. In the meantime, you'll pay all your warranty costs.

I would suggest you plan on buying an after acquired warranty, as I'm certain there will be some available, assuming Saturn takes bankruptcy.

[sarcasmo]

20. Then dropping the car off at the dealership door should be an option too.

[Romulox]

24. If you want to be sued it would. Your note would be sold on in a Chapter 7...

to another investor, and you would not be excused from your debt.

[TexasObserver]

31. They separate their warranty obligations from your duty to pay for the car.

Two separate obligations to two separate companies, so you will still owe someone for your car, and they can repo it or sue you for any deficiency on the loan, assuming a repo and sale of the property.

[Romulox]

22. Not true. A Debtor (and a TIB) have the power to Assume, Reject, or Assign

executory contracts in bankruptcy.

They are not automatically avoided. In a Chapter 11 context, such contracts would assuredly be assumed, as they would be vital to the health of the company going forward (in other words, nobody would buy any more cars from a manufacturer who didn't honor pre-bankruptcy warranties.)

[sarcasmo]

25. I hope you are correct. We took the 100,000 mile warranty because of all the power options.

[yodoobo]

27. Who did you buy that 100,000 mile warranty from?

Those are frequently sold by companies other than the automaker.

Those are subject to the health of the company selling it.

[sarcasmo]

28. Saturn offers that warranty.

[TexasObserver]

32. Please don't rely on that. You'll probably be disappointed.

Chapter 11 allows the debtor to accept or reject certain contracts, and your warranty would certainly be included.

Those of us who have been involved in billion dollar bankruptcies know that they are very, very complex, and that it may be months before the court hears any motions regarding how GM might handle warranty claims. There will be a roomful of lawyers, and by that I mean there will be a hundred lawyers or more, representing a variety of interests, and they'll all be pushing motions, including the Creditors Committee, who may very well want to liquidate the company immediately.

The truth is there's no way you can be sure Saturn will honor the warranty until something goes wrong with your car. If Saturn goes into bankruptcy, you may never have any warranty work from them again. You could be on your own.

If you can unload the car and buy a car from a manufacturer that isn't on the doorstep of bankruptcy court, that would be your best bet. A warranty is a piece of paper, and it's no better than the company backing it. If that company is in trouble, your warranty is in trouble.

[SmileyRose]

33. If GM continues in any fashion they will honor your warrantee

to do anything else would be a quick suicide. Regardless of the legal requirement to do so.

[MiniMe]

34. If they go out of business completely, you're SOL

If they are restructuring, it should still be good.

[dysfunctional press]

39. a lot of chryslers now come with lifetime warranties...

which apparently means the life of your car, or the life of the company- whichever one dies first...

[leftofthedial]

40. how such obligations are handled is part of the terms of the bankruptcy

remember, bankruptcy doesn't mean they go out of business.