Business

Bankruptcy will not affect GM, Chrysler vehicle warranties

BOSTON – Owners of General Motors (GM) and Chrysler automobiles can obtain warranty-covered service at another dealership should theirs be closed as the two manufacturers proceed with bankruptcy filings.About 2,000 dealerships will be closed by default across the country when their franchising contracts are not renewed, many of them in June. The situation is leaving thousands of car and truck owners confused about where they can bring their vehicles for service.”Millions of GM and Chrysler customers will be affected by dealer closings and minimizing the amount of confusion is important,” said Paula Fleming, spokeswoman for the regional Better Business Bureau (BBB). “In some cases, owners will have to drive a little farther to get their vehicle serviced if their dealer shuts down. However, there can be larger issues consumers need to be aware of, including the potential for getting stuck with the payment for the vehicle they traded in.”After filing for Chapter 11 bankruptcy protection, Chrysler announced plans to terminate 798 franchise agreements with dealers across the U.S. – about 25 percent of Chrysler dealers. Approximately four million customers who bought or serviced their cars at these dealerships will be affected.GM has also announced plans not to renew agreements with 1,100 dealers in the U.S. and 300 of the 700 GM dealers in Canada.According to the automakers, the dealerships targeted for closure scored low on customer satisfaction, sales performance and market saturation. GM found that about 50 percent of the dealers whose contracts are not being renewed sold only an average of35 cars in 2008. Similarly, Chrysler stated the closing dealerships sold less than 100 vehicles. When compared to other manufacturers, GM and Chrysler will still have a large number of dealers. GM is aiming to maintain 3,600 dealers by 2,010 while Chrysler projects it will have 2,411. Currently, Honda has 1,304 dealers and Toyota 1,470 dealers in the US.Fleming said 1,000 GM dealers have received letters notifying them that the automaker will not renew their agreement. Most of these dealers have contract that expire in October 2010.Customers have find out which Chrysler dealers are closings by going online to http://graphicsweb.wsj.com/php/CARDEALERS0905.html.GM has not released an official list of dealers.Fleming said many automobile owners are concerned about their warranty or extended warranty. “A warranty or extended warranty is offered by the automaker and is not affected by a dealer closing,” she said. “Both Chrysler and GM have indicated that they are committed to honoring their manufacturer’s warranty despite declaring bankruptcy. Extended auto warranties, such as the protection plans offered by GM, are backed by a separate company which is affiliated with-but not financially tied to -the company that actually manufactures the vehicles.”Chrysler has vowed to notify customers in June about where they can take their autos for service. GM owners can find the nearest dealer by going online to www.gm.com/vehicles/dealer.Additional concerns have arisen over what to do if the dealership closes without paying off the loan on an auto that was taken in trade.”While a dealer is supposed to pay off the loan on a vehicle they accept for a trade-in, they might not if they go out of business,” said Fleming. “When this happens, the original owner could be liable for making payments on both cars or the lender could go after the person who bought the used car from the dealer. While this is a rare occurrence, it can happen and states such as California have created funds to reimburse such victims.”

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