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Public Takes Dim View of GM, Federal Bailout

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It's often said that Americans root for the underdog. However, this may not apply to underdogs that used to be among the economy's big dogs. A flurry of consumer polling since General Motors announced its bankruptcy on June 1 finds the public taking a dim view of the company and the federal bailout of the firm.

At the same time, the mass shutdown of GM and Chrysler dealerships means, as one auto-industry analyst puts it, that sizable numbers of consumers are now "untethered" from local loyalties that sometimes extend back for multiple generations, meaning there's even more flux in Americans' automotive attitudes than one would gather from simply focusing on the turmoil in Detroit.

If too few consumers were clamoring to buy GM cars before its recent troubles, bankruptcy and government intervention don't look likely to change that for the better. A post-bankruptcy Rasmussen Reports poll found 41 percent of respondents saying the quality of GM cars will get worse with the federal government as the company's chief owner, vs. 19 percent saying it'll get better. That dovetails with a BIGresearch poll in which a mere 14 percent said it's likely or very likely they'd "consider buying a GM product with the U.S. government in control."

Likewise, 49 percent of respondents to a Gallup poll said an automaker's bankruptcy would make them less likely to buy a vehicle from that company. The bailout of GM is itself a lightning rod for public disapproval: In an NBC News/Wall Street Journal survey following GM's bankruptcy declaration, 53 percent of respondents said they disapprove (vs. 39 percent approving) "of the federal government providing loans and financial assistance to Chrysler and GM."

However necessary they are, the steps GM is taking to restructure itself can also provoke public ire toward the company. "Compared to other industries, people feel more of a connectedness to cars, and they see how it affects the economy," says Mark Guarino, senior auto-industry analyst at research firm Mintel. The mass layoffs by GM make a strongly negative impression on people, he says, particularly since so many Americans "may be two steps away from a community that had a plant closing." He notes that GM hasn't closed any of its plants outside the U.S., and this itself has provoked antipathy toward the company on the part of people who are aware of the company's decisions -- a sentiment likely to outlive the recession. "The cynicism out there is so strong that people are going to demand more of car companies," says Guarino.

Amid all the focus on Detroit, it's easily overlooked that consumers' car-buying loyalties often rely as much on a local dealership as they do on an automotive brand. With GM and Chrysler both closing many dealerships as part of their bailout-plus-restructuring, some customers will be up for grabs, while others will adjust their thinking. According to Guarino, "Essentially, customers are now going to say to a dealer, 'What are you going to give me?' That loyalty to a dealership is becoming a thing of the past." He adds that there's now a lot of confusion among consumers about why particular dealerships were shut down -- and the automakers haven't really addressed this. "I think we're still in the damage period right now." And it's not as if the problem will simply go away, even as consumers overcome their current reluctance to make big-ticket purchases. "Dealers aren't going to know a lot of their customers," says Guarino, "and the customers who come to a dealership aren't necessarily going to be committed to buying those cars."

To the extent that consumers are showing interest in GM and Chrysler vehicles, price is an obvious factor. There's actually been an uptick in recent weeks in "click traffic" for those companies' models on kbb.com, the Kelley Blue Book site to which consumers go to research cars they might buy. It may partly be a matter of patriotism -- a wish to keep U.S. automakers alive, says Jack Nerad, executive editorial director and executive market analyst for Kelley Blue Book, which tracks the automotive market and consumer attitudes toward it, and kbb.com.

But he says many consumers smell blood, and he characterizes their thinking as being: "Let's pick the bones of this carcass and see if there's a great bargain to be had." Nonetheless, he notes that Chrysler "took a major hit in sales" after it declared bankruptcy, and he expects GM to do the same.

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