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The car buyer is a very strange and unpredictable animal!
Six months ago, the then CEO’s of General Motors and Chrysler, Rick Wagoner and Bob Nardelli, had shuddered at the thought of having to address the issue of bankruptcy – for fear that it would, in one fell swoop, eliminate all traffic from their stores. The very logical reasoning being that no prospective buyer would risk putting down a large chunk of his or her hard earned cash on an automobile made by a company that could be on the verge of going bankrupt. The catch-22 situation these CEO’s found themselves in was that the more they addressed the issue, the more they risked driving buyers away, and thereby precipitating the worsening of their already bleak financial situation.
Both Wagoner and Nardelli theorized that if their companies were to file for chapter 11, sales would dry up completely, and they would never be able to recover – that hasn’t happened though. In the US, Chrysler sold 61,000 cars in April, prior to filing for bankruptcy, and 65,000 cars in May – post bankruptcy. It’ll be interesting to see how they do having already reemerged from Chapter 11.
There have been a number of polls in the US, in which participants have largely suggested that they would now be more likely than before to buy an American car. And this appears to have been borne out by the sales figures over the past few months, which has seen year-on-year sales of American brands fall far less than their foreign rivals.
It’s a strange phenomenon indeed, and it’s not clear whether it can be attributed directly to patriotism, or, quite simply, the age old adage of, ‘Any publicity is good publicity.’ After all, both GM and Chrysler have had ample opportunity to extol the virtues of their current models, as well as spell out the progress they’ve made in terms of operational efficiency. Ironically enough, it seems as though the top of the mind recall generated by this renewed interest in the brands has paid dividends on the sales floor, which is probably a good thing since both automakers need all the help they can get to restructure, and emerge as financially viable entities.
Filing for Chapter 11, then, could actually be the magic pill that both GM and Chrysler need to survive – there’s simply
no conceivable way, other than bankruptcy court, that they could have restructured their organizations, and reduced
their liabilities, as drastically as they’ve done (or, as is the case with GM, are in the process of doing).
It appears, therefore, that filing for bankruptcy may be the most effective way of reducing debt and
increasing sales –
it truly is a strange world we live in.
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