Between 2008 and 2010, the American Auto Industry suffered as part of a global financial downturn and economic troubles. In particular, General Motors and Chrysler received controversial government assistance commonly referred to as the auto manufacturer bailout. During this period consumers were left wondering whether their express written warranties would be honored if the automobile manufacturers filed for bankruptcy and whether existing and future lemon law claimants would be compensated for material defects with their vehicles.
As it turned out, both General Motors and Chrysler did file for chapter 11 bankruptcies that were considered a reorganization of the companies. During the restructuring of both General Motors and Chrysler, there was some disruption in payments on lemon law claims including bounced checks from the auto manufacturers; however, both companies indicated that they would honor express written warranties and state lemon law claims.
While Americans now understand how deeply a bad economy can affect everyone from big business to car owners, many were left wondering whether General Motors and Chrysler agreed to pay lemon law claimants and honor express written warranties. In a review of Chrysler’s Master Transaction Agreement, the newly restructured Chrysler did agree to assume all liabilities stemming from product warranties, product returns and product rebates provided by Chrysler before the reorganization of the company. What this meant for consumers was that the restructured Chrysler would honor all express written warranties on their vehicles regardless of whether the vehicle was manufacturer prior to, during or after the company’s restructuring. Lemon law claims are essentially suits for breach of the manufacturer’s express written warranty, therefore, by honoring all warranties Chrysler chose to honor consumer’s lemon law claims as well.
Similar to Chrysler’s transaction agreement, under General Motor’s Master Sale and Purchase Agreement, the newly restructured General Motors explicitly assumed all debt that stemmed from claims against express written warranties as well as the then current and prior lemon law claims. The agreement makes it clear that the new General Motors chose to stand behind all warranties, regardless of when the warranty was provided to the consumer.
Government assistance of this magnitude was something that the American public had never experienced and had never expected. Now knowing that the failure of large automobile manufacturers is possible and that consumer protection may not be guaranteed with a warranty, many consumers may have changed their views on the controversial automobile manufacturer bailout. Without government assistance, it is possible that warranties and lemon law claims may not have been honored.