In the days after Chrysler's Chapter 11 filing, people are watching closely to see if consumers are still willing to buy cars from an automaker that's in bankruptcy court.
The industry has warned that carmakers can't go into Chapter 11 like other companies, because people won't buy a car from a bankrupt automaker.
But there's evidence at dealerships around the country that people are still willing to shop for Chrysler vehicles. Some are bargain hunters. Some are there out of a sense of duty, trying to do something good for their country. And others may just want a Chrysler, Dodge or Jeep and are ready to buy.
Still, dealers are nervous. They worry whether they'll be around in a few months, once Chrysler gets around to closing some portion of its 3,200 dealers, a number it says it wants to trim. They worry that production shutdowns — Chrysler has closed its plants for at least a month — will leave them without anything to sell in a couple of months. And they worry, mostly, about the uncertainty of what's to come.
Like any good salesman, though, dealers are trying to put an optimistic spin on the situation. "America loves an underdog," says Alan Wilson, president of Howard Wilson Chrysler-Jeep-Suzuki in the Jackson, Miss., metro area. "America has always rallied to people when they are down on their luck."
Consumer website Edmunds.com says Chrysler dealers got an initial bump in interest after its bankruptcy filing. Web searches for Chrysler products jumped 15%, Edmunds says.
"Maybe the Chrysler bankruptcy announcement attracted the bargain shoppers, who may think a bankruptcy is the same as liquidation with price-busting clearance sales," says Michelle Krebs, editor of Edmunds.com's AutoObserver.
Dealers back that up. They say customers are coming into the showroom and making outrageously low offers, expecting dealers to take any price just to sell a car. Edmunds.com's most recent data indicate that Chryslers already were selling for an average of 18.1% below sticker price before the bankruptcy filing. The industry average discount is 15.6%.
Some people are overly optimistic about markdowns. Gary Burnett, sales manager at Bill Luke Chrysler, Jeep & Dodge in Phoenix, says one buyer wanted a 75% discount.
"That's a $25,000 car right there," Burnett says, pointing to a shiny 2009 Dodge Journey. "A guy came in and offered me $6,000 for it, including tax and license. He said, 'Well, you guys are going bankrupt anyway …' "
What does bankruptcy mean?
Not everyone knows what it means for Chrysler to be in Chapter 11, which leaves some people believing cars will be sold off in a fire sale because Chrysler is going out of business.
The truth is, there's a chance Chrysler could face liquidation. That would mean the Chrysler as we know it — the U.S.-based carmaker that produces Chrysler, Jeep and Dodge brand cars and trucks — would be sold off for its parts, possibly splitting the brands and selling off the factories and machinery.
But we're not at that point. Far from it. The automaker is in court attempting to restructure its debt, something that doesn't affect the average consumer. It's closed its plants temporarily, but dealers are still selling cars, and the company is still operating. Chrysler is trying to get a judge to agree to let Italian automaker Fiat take control of its operations and to force debt holders to agree to take shares in the new company.