Contagious?

General Motors and Chrysler are travelling down a path that seems to be leading them to Chapter 11 bankruptcy…and there is considerable support for that strategy from those who believe the company has been out of touch with the products the marketplace has needed and wanted for years. Thus, they say, the company deserves to “go under.” That position is further supported by “free market” advocates who believe “free market” outcomes should happen naturally, and the bailouts are an attempt to keep a dead man alive.

But note the “American Thrift” survey in the April 27th issue of TIME Magazine (click the “Shopping” button). If allowed to go bankrupt, 29% of Americans, nearly a third, will not buy a car from a U.S. automaker that declared bankruptcy, even if the government guarantees the warranty.

That means that a massive public relations campaign will be required to restore confidence in the company and their products, and most likely, it will take years to accomplish. The entire supply chain will be at risk. In fact, the fear might be contagious, and the 29% figure will no doubt increase as people who are current car owners of these bankrupt operations begin to worry about getting access to parts and start questioning the integrity of all American automakers. Despite the inherent risks of all business, many may believe that a sacred trust has been broken should these bankruptcies happen. The ensuing public relations campaign most likely will require a broader range than anyone would fathom except those who have really thought this thing through.

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