Chevy Cruze: Top-Selling Car Thanks to Bankruptcy!

By Jim Ince

Many who read the headline of this article might question the premise of a bankruptcy leading to the hottest-selling car in the world.  It would certainly be a stretch if this were a fictional story.  The amazing thing about this article is that it is absolutely true.

First of all, the Chevy Cruze is one of the hottest-selling cars in any domestic car line.  There are a lot of reasons for its popularity.  It is apparently a well-built car and it gets great gas mileage.  The Cruze has sold over 700,000 units, either under that name or under the Daewoo or Holden names.  The Cruze grew out of a former good seller, the Cobalt, but Cruze sales have tripled those of the best sales year for the Cobalt.  The Cruze is overtaking even imports.  More importantly for the future of GMC, the vast majority of Cruze buyers are purchasing their first Chevrolet when buying a Cruze.  Not only is it a very popular car, but it has better gas mileage than any gasoline-powered car, including the hybrids.  Further, it is loaded with many safety features often found only on the more expensive imports.

How does bankruptcy lead to such a success?  Prior to the bankruptcy of GMAC, the company was bogged down with lines of cars that had quit selling many years ago.  It did not have the resources to develop new lines of automobiles or the flexibility to retool plants because so much of its monthly income was devoted to servicing too much debt.  If three-quarters of the income is going to debt servicing, then there is nothing left for investment by the time a company that size pays payroll and buys current materials.

GMAC filed what many call a pre-packaged bankruptcy.  Realistically, it is not all that different from the type of bankruptcy many individuals file.  All “pre-packaged” means is that the outcome of the case was fairly certain.  A good consumer bankruptcy practitioner can predict how a case will be resolved.  Just as in the GMAC bankruptcy, there are no guarantees, but with an experienced the law firm, results are somewhat predictable.

GMAC stripped off millions of dollars in debt.  It was then able to take that freed-up capital and buy the tooling and pay the engineers what it needed to come up with a radically different design for an automobile.  That one car has led the company to the profitability that had eluded them all of these years.

Individuals often have a very similar result.  It is not uncommon to have a client who has devoted 30 to 40 percent of their income to paying past debt.  They have had to clean out savings and forgo buying the things needed to fix up their residence.  By filing for bankruptcy, the 30 to 40 percent of the income that was going to debt can now go for those capital improvements.

It is not uncommon for a client to let our firm know that, post-bankruptcy, they are able to actually visualize a retirement or send a child to college.  Prior to the filing of the case, they really believed they would have to work their entire lives just to get a chance to catch up.  In reality, had they continued in the cycle they were in, the credit card debts would not have reduced in their lifetime.  Most people are paying the minimums on their credit cards and can only maintain the level they are currently paying.  You may be in the same situation, but you will not really know until you meet with a qualified bankruptcy attorney.  Come visit with one of our attorneys and see what we may be able to do with your crushing debt.

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