Auto Bailout

The purposes of the loans were to provide operating cash for G.M. and Chrysler, and keep car loans available to buyers. GM earned $23 billion in 2010 and has invested $8.1 billion in thirty four U.S. plants and created or retained more than 23,000 jobs since 2009 (Shepardson, David 2013).

In 2009, the Obama Administration bailed out the General Motors and Chrysler automobile companies. Having begun their decent into bankruptcy in 2008, losing thousands of jobs, sales plummeting forty percent, with a high threat of liquidation, General Motors and Chrysler finally reached government-assisted chapter 11 bankruptcy in 2009. Obama allocated eighty five billion dollars in TARP funds to the auto industry, close to fifty billion dollars of it going to General Motors. The allocated funds were successful in keeping two of the Big Three auto companies afloat, keeping taxes from sky rocketing and saving millions of jobs.

On December 18th 2014 the auto industry bailout ordeal came to a close when the US Treasury Department sold the last of its stock in General Motors, for 19 billion dollars, in the end recouping about 39 billion out of 50.1 billion that was pumped into the Big Three automakers at the tail end of 2008 by the Bush and Obama administrations (Muller). The big question that comes up in the end of this ordeal by many people on both sides of the party line is that, was all this worth it? What would have happened if we didn’t bail out the automotive industry?

job, then all the union members did by striking is quit their jobs and lose

Recently, we have all heard about the financial crisis. Many industries have suffered beginning from the banks, the first and worst hit industry. Since many were retrenched, the consumer-based industries have suffered. This time, the auto industry was hit. Three big auto companies, General Motors, Daimler Chrysler LLC and Ford, were in trouble this time. The $14 billion emergency loan for the companies was cancelled as the Senate failed to approve of it. Why did they do so? What effects will it have?

An article published by the New York Times details Obama’s bailout. According to the article, the bailout was mainly focused towards the auto companies General Motors, and Chrysler. Evidently, this costly bailout was in vain. For example, cars such as the Focus and C-Max Hybrid were being sold at such a low rate that factories producing these vehicles were shut down for over three weeks. Also, due to low gas prices, automobile companies will have a harder time selling fuel efficient cars. This bailout is a great example of why the market should be allowed to regulate itself based on consumer demand. Libertarian economic policies are constructed with this value in

Under the Bush Administration, General Motors and Chrysler auto companies were stuck in a situation that had 2 options; get a loan, or file for bankruptcy and lose 3 million employees. Due to the carelessness of General Motors CEO’s and the failure to create a viable business plan were the reason why they must make this choice that could affect millions of people worldwide. General Motors and Chrysler went to President Bush to look for a loan where Bush then went to the Troubled Asset Relief Program, (TARP) to lend General Motors 9.4 billion and $4 billion to Chrysler. The loan of $13.4 billion (Ikenson) lasted long enough for General Motors and Chrysler to get the next future president convinced that they were worth funding. Although he admitted there was not a viable business plan, President Obama was convinced through the fear of traditional bankruptcy and he decided to help fund General Motors and Chrysler. The Obama Administration decided to have the taxpayers pay for 60% of General Motors and 10% of Chrysler. Obama told a group of General Motor workers, “Your survival and success of our economy depended on making sure that we got the U.S. auto industry back on its feet.” (Ikenson) The greatest concern of the auto bailout is the consequence that could affect people worldwide - “the undermining of the rule of law, the property confiscations, the politically driven decisions and the distortion of market signals” (Ikenson)

In the latter part of 2008, the United States’ economy was rapidly plummeting - the stock market crashed, the housing bubble burst and gas prices skyrocketed. The majority of U.S. based firms faced the reality that they would not be able to survive during such desperate economic times. The U.S. automobile industry, in particular, began to buckle under the depressed economy. The government stepped in proposing a multi-billion dollar bailout to stimulate the economy and restore economic balance. The possibility of this unprecedented government intervention was condemned by many economists. If the government helped the ailing automotive industry, this industry would have to tighten their expenditures and plan for the future to prove to

The United Auto Workers Union (UAW) negotiated a golden-parachute of a contract for 40,000 auto workers and future employees. After intense negotiations, a strike was staved off by Chrysler’s agreeing to meet the demands of the UAW. The specific demand in particular that initially prompted the rejection of the labor contract was the two-tier wage structure. In the new agreement, Chrysler agreed to omit that verbiage in the contract and agreed to a higher starting hourly wage, and a signing bonus. In addition to the victory over the wage structure, employees also walked away from the table with the pay raises that was included in the original labor contract. It appears that the negotiations were profitable in the United Auto Workers Union’s

Through an analysis of the ethics behind government bailouts and an evaluation of arguments for and against the decision to give out such a package to the auto firms, I shall argue in this paper that, given the circumstances in which the decision had to be hastily made,

The Auto Recovery Act was difficult for most to understand and seemed inequitable or unfair to bail this industry out and not others or private taxpaying citizens. After all, the billions of dollars here were taxpayer’s money but the other options would only end in tragic results. However, few were discussed in public. Candidate Mitt Romney having vast experiences in this field was mocked for offering the legal option, bankruptcy. Romney wrote, the US auto industry is of bankruptcy is the only path to the restructuring the industry for a true lasting recovery. The auto industry would remove excess labor, pension and real estate costs that continue to burden their profitability. The government should provide guarantees for post-bankruptcy financing

Daniel Levi, in his book, Group Dynamics for Teams, declares that “a team is a special type of group in which people work interdependently to accomplish a goal” (1). Near the end of 2008, Chrysler and General Motors were in need of help because they confessed to the world that they were in danger of financially collapsing, thus the US auto bailout was created. The task force was brought forth by the Obama administration to help Chrysler and General Motors overcome their financial obstacles, in addition to implementing new ideas that would help them develop.

Due to the devastating economic crisis in 2008, American automobile industry suffered a disastrous period. In particular, the sales volume of Chrysler went down 30.3% compared to 2007. Without doubt, Chrysler had the most terrible performance among the three giant native auto companies in North American while its market share declined to about 10%. Meanwhile, the cost of Chrysler was related high, which led Chrysler has less competitiveness. In addition, Chrysler also had heavy liabilities, and it made Chrysler’s financial situation worse.

The reason Ford and its competitors have such a large influence in the automobile market; particularly in the U.S is because of General Motors Corporation (GMC). In the year 2005, GMC started offering their consumers the same discount pricing that they offer their employees including their relatives. This unfamiliar strategy forced Toyota, Ford, Chrysler and other automotive manufacturers to retaliate. In order to match General Motors Corporation 's employee-discount plan, Ford started offering their employees rewards up to $1,000 if they managed to convince their relatives and/or friends to purchase their various trucks and automobiles. In addition, the company also offered its consumers the same prices that they gave to their employees. In that same year, Chrysler revealed that it had been conducting research on multiple alternative strategies, but instead,

The collapse of GM also results significant impact on their shareholders. Investors in $27 billion worth of GM bonds, including mutual funds and thousands of individual investors, will end up with new stock in a reorganized GM worth a fraction of their original investment. The government's plan calls for 10% of the new GM to be owned by existing bondholders, while a United Auto Workers union health-care fund will own 17.5%. However, Owners of GM shares, which closed at just 75 cents a share on Friday of the bankruptcy week, would have their investments essentially wiped out. So their investors incur enormous loss from it.