Treasury Dept. will provide the bulk of funds for the Warranty Commitment Program, designed to cover GM, Chrysler warranties in the event either makes goes into bankruptcy.
The White House and U.S. Treasury Department have announced a new program that guarantees the warranty of every new GM and Chrysler car and truck sold during the companies’ restructuring efforts, even if one or both of the companies becomes unable to honor warranty claims during that period.
According to the Obama administration’s automotive assessment and restructuring plan:”If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always,” asserted President Barack Obama, during his speech on the automotive bailout, Monday morning. “Your warranty will be safe. In fact, it will be safer than it’s ever been. Because starting today, the United States government will stand behind your warranty.”
Consumers won’t have to do anything to qualify for the warranty guarantee. Enrollment will be automatic when a vehicle is purchased.
Under the so-called Warranty Commitment Program, GM and Chrysler will each partially fund a special-purpose company that will pay covered warranty claims. The total amount of cash to be contributed will be 125% of the expected cost of warranty service on each covered vehicle. The manufacturers will contribute 15% of the projected cost from company funds and the federal government will provide additional funds to cover 110% of the projected cost.
If GM or Chrysler goes out of business, the warranty administrator and the U.S. Government will search for a third party warranty service provider to assume responsibility for all of the warranties covered by the program, in exchange for the assets of the program.
Should Ford request government assistance in the future — Ford hasn’t asked for federal help, so far — the Warranty Commitment Program would cover their vehicles also.
Mike Levine, Editor-in-Chief of PickupTrucks.com, provided this report.