What Happens to Your Car Warranty if GM or Chrysler Goes Bankrupt

Yesterday, the Obama administration issued an ultimatum to GM and Chrysler, asking Detroit’s troubled auto makers to restructure immediately or they will face other options including bankruptcy. Unlike last December when the Bush administration gave GM and Chrysler $17.4 bailout to keep them operating, this time the government decided to take a hard line on both car makers after a review showed that on reform the government demanded was made since receiving the first funding more three months ago. As part of the government’s plan, GM CEO Rick Wagoner was asked to resign from the post over the week. In addition, the Treasury Department also sets an array of conditions before handing out another check, including negotiating further cuts from the UAW, reducing its unsecured debt, and coming up with a plan that works.

If again no progress on restructuring is made after 60 days, GM could end up a bankruptcy court, which could deal a severe blow to the U.S. auto industry and millions of workers employed by the auto makers as well as suppliers. On the other hand, if you are customer of GM or Chrysler who recently purchased a vehicle from either manufacture, then you may wonder what will happen to your car that’s still under warranty if one or both of them goes under. While the government is reluctant to help GM and Chrysler this time, they want to make sure consumers are protected with Warranty Commitment Program announced yesterday by the president.

Under the program, the U.S. government will work together with GM and Chrysler to establish a fund to cover costs of warranty repairs of cars made by either GM or Chrysler if either files for bankruptcy protection later:

If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always. Your warranty will be safe. In fact, it will be safer than it’s ever been, because starting today, the United States government will stand behind your warranty.

At least, that’s one thing you don’t have to worry about.

*Photo from automopedia.org

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