80% Of Consumers Won't Buy A Car From A Company That Files Bankruptcy

Vociferous southern Senators like Richard Shelby and Bob Corker made it clear during the auto industry hearings yesterday that they would very much like to see Detroit automakers go bankrupt, without mentioning how it would benefit the heavily subsidized foreign automakers in their right-to-work states.

As I watched cable news following the hearings, people appeared preaching Corker's gospel of Chapter 11 as a way to make them "financially viable," including Robert Reich (video). Nobody seemed to think that consumers will have any problem buying cars from a company that has filed for bankruptcy.

MSNBC analyst Chrystia Freeman: "I think the carmakers are using a lot of scare tactics, trying to play chicken with the politicians. We heard it with Phil Lebeau actually -- 'oh, well no one will buy cars from a company that's in bankruptcy.' I don't think that's proven."

A recent study from automotive market research firm CNW surveyed 6000 people intending to buy a new car within six months, and discovered that more than 80 percent of them would switch brands if the vehicle they wanted came from an automaker that went bankrupt. Breaking it down by company, Americans were more likely to abandon domestic automakers than foreign ones, with Chrysler faring the worst -- a full 91 percent of buyers wouldn't take home an Auburn Hills product if the company went bankrupt. Ford and GM didn't do much better, with 80 percent of those surveyed saying they would jump ship if things went south.

Freeman went on to say that foreign automakers are doing quite well in the US, actually, it's only the domestic automakers who can't be competitive because of their "legacy costs." In fact, as Marcy Wheeler notes, sales are down across the board -- and Ford's are holding better than those of Toyota, Honda, Nissan, Hyundai, and Kia. In fact, Ford doesn't require a bridge loan, and isn't asking for one -- they may have enough cash to weather the storm, but are requesting a line of credit as a backstop should things get worse. Common sense would inform most people that if this turns out to be the case, foreign automakers will not be immune, either.

The fact that the Detroit automakers are in a cash flow crunch, and that getting rid of legacy costs would do almost nothing to ameliorate that, doesn't seem to have occurred to her.

Did she pick up Richard Shelby's talking points in the green room by accident?

As former Wall Street GM analyst Ron Glanz said recently, an American made car is already selling for $4000 less than the exact same car made by a Japanese manufacturer would, expressly because of bad product legacy and fear that the manufacturer will go bankrupt. It's a PR problem that can't be overcome simply by waving your arms and shouting "no, no, really, Chapter 11 bankruptcy. . . it's just financial reorganization."

The danger here is, if they're wrong -- and all the evidence is that these "experts" are terribly, terribly wrong -- they're dooming US automakers to a hole they may never be able to dig themselves out of.

One in ten jobs in the US is directly tied to the auto industry. The stakes here are high. It shouldn't be too much to ask that people do a little research before climbing on cable news an making outrageous and demonstrably false claims.

Jane Hamsher blogs at firedoglake.com