Consumer Law

Will GM & Chrysler Honor Warranties in Bankruptcy?

By Kemnitzer, Anderson, Barron, Ogilvie & Brewer

Writing in the NY Times auto blog, Chris Jensen explores whether GM and Chrysler will honor new-car warranties if they file Chapter 11 bankruptcy. The bankruptcy experts agree the companies would not have to do so and theoretically creditors could object to being disfavored. However, creditors and the bankruptcy judges would realize that honoring warranties is critical to maintaining customer goodwill and hence the warranties would be honored.

GM's warranty costs were $4.5 billion in 2007 so clearly a lot of money is at stake.

GM has said it will always honor its warranties forever. GM has said it will honor Saab warranties post its recent bankruptcy filing in a Swedish court. Chrysler states it is committed to serving its customers.

Full post as published by Lemon Law Blog on February 21, 2009 (boomark / email).