Automobile Industry - Bailouts, Going Green and Hyundai

Detroit, Michigan grew up around the automobile industry. At its peak, Detroit was the fifth-largest city in the United States, becoming the home to over 1.8 million people by 1950 (Davey, Monica 2013). The prolific population was due greatly to the success of the auto industry in the city. At that time, Detroit was flying high, its name coined “The Motor City” (americaslibrary.gov), and automobiles greatly impacted commercialization. From transporting goods to hastening production, to selling parts, to manufacturing and selling new automobiles, the auto industry completely transformed Detroit. Things seemed

In the hyper competitive world of today’s mega corporations controlled by the sway of the stock market, giant old industrial era companies rule over the automobile market in the United States as well as large parts of the global automobile market. Companies such as General Motors, Chrysler, and Ford were at the center of it until the economic crisis now known as the Great Recession of the late 2000s. The whole market was declining in sales with General Motors and Chrysler taking the biggest hits while Ford only suffered decline comparable to foreign automakers’, Honda and Toyota, levels due to restructuring in prior years. However, the tipping point was edging closer to bankruptcy with General Motors and Chrysler that ultimately

The refusal of the bailout is sure to end with huge job losses. The automakers are likely to go bankrupt if they do not get the bailout. Millions of Americans are going to be affected. Not only the auto workers will suffer retrenchment, but people who sell cars and car dealerships are going to feel the impact. People who work in companies providing automakers with car parts are also going to suffer.

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

The government decided to take an equity stake at GM and thus was facing the possibility that a substantial amount of these funds would never be repaid. The government has already written off or realized losses of over $7 billion as of April 2012[2]. More losses will come as the government sells its remaining stake in GM and Ally Financial. The Congressional Budget Office estimates that the auto bailout will ultimately cost taxpayers a total of about $20 billion[3]. The Treasury Department is even more pessimistic, projecting that, at GM’s current stock price, taxpayers will lose $23 billion[4].

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)

Chapter four of our textbook reveals the importance of ethics and goes into detail about what ethics is. The textbook directly states that “We define ethics as society’s accepted standard of moral behavior, that is, behavior accepted by society as right rather than wrong.” The article states that although ford made defective vehicles that there were no reported injuries because of them. However, because of ethics ford is recalling the vehicles before anyone gets hurt. This proves that Ford has good

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

By 2008, the recession impacted the global marketplace, as automobile sales declined. This time period became problematic for GM since the company was near bankruptcy. After weeks on Capitol Hill in an effort save GM, an automotive bailout package was approved during the Obama Administration. Gm would receive bailout loans from the America, Canada, and the Ontarian governments to address the recession, record oil prices, and a serious global automotive crisis. As a result of GM’s bankruptcy filing, the company would reorganize itself. This meant that a popular brand like the Pontiac would be phased out, while GM focus on North American brands like Cadillac, GMC, Chevrolet, and Buick. In 2009, the old GM was replaced by the New GM in an effort

Thus, ever since its approval, the auto bailout package has given rise to widespread debate concerning the ethics of governments aiding firms in distress. Those who root for the government bailout argue on consequentialist grounds and bring to light the severe negative long-term effects of the firms going bankrupt in the absence of external aid. A cost-benefit analysis of the effects of giving out aid versus letting the companies go bankrupt is often a key element of such arguments. Those who argue against the bailouts base

There is little argument among national policymakers that the American economy was severely horsewhipped by the Great Recession of 2008, and that the country has only recently recovered sufficiently for economists to breathe a sigh of relief that the corner has been turned. Likewise, there is virtually no argument among national policymakers that a healthy maritime industry is also an essential component of the American economy. Finally, there is significant historic precedent. The U.S. government has "bailed out" other industries and sectors in the past that were viewed as being "too large to fail" because of the potential adverse impact on the American economy. For instance, in his editorial, "Rebuilding America and Creating Jobs - A Jones Act Initiative," Munoz (2011) writes, "After bailing out the auto industry with $25 billion in loans and guarantees, the government turned around and provided another $25 billion for the industry to retool its plants to compete on world markets. The experiment succeeded, and American cars and trucks are now among the best in the world" (2).

Indirect costs, in this case, include quantifiable brand damage, effects on stock prices, and customer loyalty. Auto makers who possess a good reputation enjoy a number of benefits, such as the ability to charge higher prices, growth in sales, increased return to actual quality, and protection against market entrants [Rhee and Haunschild, 2006]. However, when an auto recall is issued, that good reputation can work against the auto maker in question. For example, a companies that are rated with the highest financial stability, as rated by Moody 's Bond Record, tend to suffer the most following an auto recall, experiencing a loss of between -0.26%- -0.28% in their stock prices the day following the issuing of a recall. This translates to an average loss of $42.8 million in shareholder value following a recall announcement [McDonald, 2009]. Moreover, it is an observable phenomenon that the indirect costs of issuing an auto recall actually outweigh the direct costs as listed above [Rupp, 2004].

The prevalence of mergers and acquisitions movement nowadays has converted many large corporations into highly leveraged firms. In order to maximize cash flow, these firms have a strong incentive for excessive risk-taking activities, which drastically increase the exposure to tort liability. Carcinogens in the workplace, environmental harms to the surrounding and hazardous products are all sources of massive tortious liability. [9] Very often, business firms would reorganize their structure to exploit limited liability to evade tort claims, such as deliberately placing hazardous activities in under-funded subsidiaries. However, business ethics is a prominent contemporary concept and issue in commercial context. In terms of public policy and public interest, it is of paramount importance to deter companies from taking excessively risky activities, which cause personal injury to innocent victims.

Public debate erupted in 2014 when it was publicised that Ford, Holden and Toyota collectively had been receiving up to $500m annually of government subsidies to retain the car manufacturing industry in Australia.

GM was unable to stop these incentives because competitors weren’t letting go either. One mammoth misstep was that GM scraped its program to develop an electric car, EV1. GM could have lead in this hybrid car market