Auto Bankruptcy Stigma Lessens

The thinking that consumers wouldn't buy a car from a bankrupt manufacturer seems to have changed.
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For years, the prevailing theory among automakers was that bankruptcy spelled certain disaster because consumers would not buy cars from a bankrupt company.

Now, not so much.

"Six or eight months ago, I would have been in the camp of revenue degradation under a bankruptcy scenario, but the world changes fast," said Mark LaNeve, vice president of sales and marketing for

General Motors

(GMGMQ)

. He said government involvement, including warranties and support from President Barack Obama, and the quick

Chrysler

bankruptcy "have desensitized the consumer to some extent.

"I think it's become clear to the consumer that we're going to emerge, we're going to keep providing products to the marketplace, keep providing warranties," LaNeve said. He noted that GM was encouraged by its results in May, when it gained market share, even though "it was a foregone conclusion that we would go bankrupt on June 1."

Not only did GM gain share, but its sales picked up toward the end of the month, with a bankruptcy filing imminent.

Industry sales were slow the first three weeks of May and then picked up, said

Ford

(F) - Get Report

sales analyst George Pipas. "Both Chrysler and GM closed quite strong." Pipas said a Memorial Day promotion contributed to strong sales at GM, while Chrysler sales benefitted from closeout sales by dealers who are being terminated.

On the Chrysler sales call, Stephen Landry, Chrysler executive vice president for sales and marketing said that, "Being a big industrial company in bankruptcy, we didn't know what to anticipate in the beginning (but) we didn't turn turtle, we made our way on the playing field (and) it turned out to work for us."

LaNeve noted that GM is being helped by the media's reporting on its bankruptcy. "I've done 50 interviews since yesterday morning," he said Tuesday. "The tone of the media is incredibly important and I feel a sense of 'Hey, look, the worst is behind you, now it's time to rebuild, how are you going to do that?'"