The Financial Crisis Of The U.s. Auto Industry

In late 2008, General Motors was in financial distress due to some major financial liabilities. These included

This company was created to challenge the Ford Motor company in the twentieth century. General Motors created automatic transmissions, practical air conditioning, and the very first version self start. These creations gave General Motors the edge over Ford and other car companies at the time. “In the early years, GM's marketers added style and color to cars, putting Henry Ford and his industry-leading Model T's on the defensive” (Woodyard 03).With knowledge and advancement General Motors performed well and gained from it. But in recent years General Motors started to cut corners and build things of a cheaper quality making mistakes. These mistakes and corner cutting created problems for General Motors. It eventually lead to General Motors filing for bankruptcy on June 1st in 2009. General Motors was eventually saved from their bankruptcy but the damage was done. The General Motors plant in Moraine Ohio was shut down causing a lot of people to lose their jobs. The mistakes General Motor made did not just hurt themselves but the people who relied on those jobs. There are people who are now homeless and are struggling. The knowledge General Motors had helped them reach their success but the creators lost sight of their morals. They took the easy route and failed hurting plenty of people destroying hundreds of families and people's

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

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)

Think of it this way, all of the debt, problems, and poor choices made by the notoriously distinguished old GM were put on a boat (Motors Liquidation, Inc.) and given a viking burial (code 363 liquidated (sold in parts for as much profit as possible)) while every asset went to a new company convolutedly called General Motors. Basically, New GM made out like a bandit.

The financial crisis that put our economy on a downhill rocky road is known as the Great Recession of 2008. The U.S. Governments resolution to one the biggest panics was revolved around multiple bailout and fiscal measures. The fight to pull our weakening economy out of a dark hole left the American people with hope of advancing what gets thrown their way. The many bailout programs implemented by the U.S. Government can only hold the economy together for so long until were up to our knees in debt.

General Motors, the “mother company” has faced many troubles in the past, and surfaced. A research by the National Research Council in the United States has revealed in 1992 that there had many impacts and future impacts in the automotive industry, indeed; it would affect the jobs and the internal economy. However, General Motors understood the threat potential that this and established strategic plans to revert the trend. Furthermore, whether General Motor Company was able to change the trend, and it saw the internal and external factors, prepared a strategic plan, Holden being the first brand in Australia, with at least just the 10 % of the population compared with the USA, the way to get a plan looks easier. In addition, it is easier to see a trend in countries with low population and good policymakers. In 2008 General Motors faced again the limit to bankruptcy. A fierce plan to develop and a new business association with FIAT made that GM avoid the dissolution. Even do all Europe have had a similar crisis( Boudette & Choudhury,

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 States was coming out of the most severe economic turmoil of its history at the time World War II began in 1939. The federal government was already in debt to the tune of around 40 billion dollars, more than doubling in since 1930, largely due to federal spending in attempts to ease the economic crisis of the great depression. Americans were in no way ready, willing or financially capable of supporting another war against the Germans. The ideals of the average American at the time, much like during the beginning of World War I, was one of strict neutrality.

General Motors, at one point the largest car manufacturer in the world, needed a bailout in 2009 to stay in business. One of the main reason the auto giant filed for bankruptcy was seen on the balance sheet where assets were $82.2 billion and a vast amount of liabilities that equated to a whopping $172 billion. With this massive amount of debt hanging over the company, General Motors according to the Economist, “the chief financial officer sought to raise $3 billion through a sale of bonds or shares,”(Economist Editor). After Lehman Brothers had fallen GM knew that they would not be able to get the funds, so they tried to sell non-core assets,(Economist Editor). At this point, the stock price for General Motors fell to $3, (Economist Editor).

Certainly General Motor’s bailout allowed the company to identify and restructure many areas in which the company was losing money, in order to obtain success and become wealthy again (Kinicki & Williams, 2013). The four basic strategies types to reacting to an organizations uncertainty are: Becoming Defenders, Prospectors, Analyzers and Reactors. General Motors applied the first step of the four basic strategies to a degree, because they made adjustments in their existing operations, but they did not stick with what they knew how to do best, but had to restructure pretty much all of their vision and culture. The company certainly was prospectors because they focused on changing the way they conducted business, focusing more on Margin and

One is the fact that the bailout was saving many Americans their jobs by ensuring these companies stay afloat. GM had many employees and many retirees that depended on the company, and if the company closed down, it would render so many people jobless and without a source of income. On the other hand, according to the law of utilitarianism, it was ethical for the government to lend a helping hand to GM to keep the company afloat. The initial agreement between GM and the government provided the option of the company redeeming its stake back from the government once they achieved financial stability. Unfortunately, this never came to be. The government invested taxpayers’ money in a collapsing company that was experiencing losses year in year out. This was unethical; the company should have bailed itself out from this crisis since there were other automotive companies still afloat. Justice dictates that since it is GM that got themselves into this mess, then the same company should figure out a way out of the same mess. This is true since even when the government opted to bail out GM, it was the company that drew up a plan that would give them financial stability. Therefore, one would argue that GM should have figured out a way to solve their financial crisis by selling out the non-profitable plants and sections of the company and cutting costs to become profitable once more. They should also have invested in

In 2008 and 2009, a series of bailouts were provided to General Motors and Chrysler, due to slowing car sales and massive quarterly losses. Unions buckled due to the fact that they received much higher wages, and more luxurious benefits than their non-unionized counterparts. In 2006, Consumer Reports top ten car picks were Japanese (Noe). Parts makers were quick to move jobs overseas, where laborers were willing to work for much less money. In 2008, GM closed 14 factories, 2,000 dealers, and cut 47,000 employees. All of these factors, among numerous more, were responsible for the collapse of the economy on a national and global scale. Gasoline prices soared during the energy crisis which lasted from 2003-2008. Consumers moved from buying SUV's and trucks to more fuel-efficient cars, such as hybrids. This was especially disconcerting considering that these larger vehicles were the most profitable for the automakers (MSNBC). The market which was hardest hit was that of the parts-makers, which saw their cash flow cut in half, since automakers were rushing to cut production (Economist). GM filed for bankruptcy 32 days after Chrysler, effectively making GM the fourth-largest company ever to file for bankruptcy (Carty). According to Darwin Bible, "probably one of the worst things about it has been watching all the stress on workers' faces and their families' faces" (Carty). Overall mental health is rapidly

During the 2007-2008 economic recession, one of the most impacted industries was the automobile industry. The Big Three – General Motors, Ford, and Chrysler were financially struggling to survive in the market. At this time, the Federal government worked closely with the Big Three in providing $17.4 billion worth of loans to cover operational costs for the companies. One major rival from the pack that withdrew the loan from the government was Ford Motor Company. Although Ford sales had been decreasing 20% from 2007-2008, Ford had prepared themselves in advance in 2006 by accepting an agreement with the United Automobile Workers. This agreement was incorporated to use company stock in order to finance half of its new retiree health care trust. During this time, Ford was led by President and Chief Executive Officer, Alan Mulally. Mulally was hired by the Executive Chairman of the company’s Board of Directors, William Clay Ford Jr., on September 5, 2006. Immediately after being hired, Mulally began business changes internally and externally by making tough decisions that strengthened the company. Changes such as remaking the product lines, accumulating a sufficient amount of capital from U.S. banks, and recreating a brand image as a result of producing the Drive One campaign. All these changes impacted the company from top to bottom by increasing profitability and increasing employee morale making Ford Motor Company the victor of the Big Three.

Forwarded here with a term paper report on “General Motors Bankruptcy” submitted by Siddharth Dixit Enrollment No A7004611108 student of