Chrysler’s decision to declare Chapter 11 bankruptcy while merging with Italy’s Fiat Group will impact everyone, including car buyers, owners, dealers, suppliers and even mechanics.
First, it’s important to understand that Chapter 11 bankruptcy does not mean that Chrysler is going out of business. Chapter 11 is a legal device that allows a company to reorganize its finances, renegotiate its contracts and keep its creditors waiting while it tries to get back on its feet. Under Chapter 11, Chrysler will continue to sell cars and honor its vehicle warranties.
So here’s what the bankruptcy is likely to mean to you:
- If you currently own a Chrysler vehicle, you’ll still be able to have your warranty honored – at least for the foreseeable future. However, when it comes time to sell or trade in your car, the vehicle’s value will probably be lower than expected as long as there is doubt about the company’s future.
- If you’re thinking about buying a Chrysler vehicle, good deals are likely to be plentiful for quite a while. (This is true for all carmakers!) Also, expect to see some new Chrysler models in showrooms when Fiat begins to make cars (under the Chrysler brand) in 2011.
- Although Chrysler intends to keep selling replacement parts, finding those parts may become more and more difficult as parts suppliers struggle to stay in business themselves. With Chrysler allowed to hold back paying its bills while under Chapter 11 protection, many smaller suppliers may have to close up shop. And that could hurt all American carmakers.
- Chrysler is expected to reduce the size of its dealer network to close costs. This may make it more difficult to find a Chrysler dealer convenient to where you live. It may also reduce employment opportunities for mechanics who work in Chrysler dealer service centers.
- With Fiat planning to make Chrysler-branded cars in the United States, that should mean more jobs for U.S. auto workers as well as a whole new line of products for body shops and mechanics to master.
With the U.S. economy still in recession, it is in the federal government’s interest to make sure Chrysler and the other major American automakers stay open for business. So look for Washington to do everything it can to keep Chrysler and its suppliers producing products.
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