Big Three Auto Bailout

In the years 2007-2008, the United States went through a serious economic downturn, this economic downturn, also known as the “Great Recession,” impacted not only the United States but impacted the economies of countries all over the worlds. During this recession the American Automotive Industry suffered significantly, so much so that two of the “Big Three” automotive companies, almost went completely out of business The “Big Three” consisted of General Motors, Chrysler Group, and Ford which together help employ millions ofAmericans.

President Obama eventually stepped in and loaned General Motors and Chrysler Group billions of dollars to stay in business; this was known as the “Government Bailout” of the American Automotive Industry, Some Americans disagreed with President Obama‘s decision, while most supported him, Without the Automotive bailout, two of the largest companies in America would have been forced to close shop and “let go” of thousands of hard working people; this in turn would have caused the employment rate to sky rocket even higher, possibly turning “The Great Recession” into a depression.

The bailout of the Automotive Industry was the reason The United States recovered from the recession at the rate that it did. In 2008 the Executives of GM, Chrysler and Ford all to traveled to Washington DC. to explain to the American government, and the American people why they felt they deserved a bailout, and how each company planned on repaying the money. After a lot of negotiating between the automakers and congress, GM and Chrysler were able to prove that they needed the loans for survival, whereas Ford turned out not needing the financial assistance.

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According to an article written by USA Today, the government loaned General Motors a total of $194 Billion dollars over the course of two years and purchased about 61% of the company’s stock (Woodyard) This put the American government in charge of the company and many began referring to General Motors as “Government Motors.” Recently the government sold their shares of the company and the ownership of GM is back in the hands of the company.

Chrysler, being a smaller company, received less government funding, about $1 billion (Frizell). In 2007 Fiat, a successful Italian automotive company, began the process to purchasing Chrysler. Fiat started directing Chrysler in a positive, profit earning, direction and in 2013 purchased the rest of the company for a total of $6.3 Billion, according to an article released by USA today. Some American’s opposed the President‘s decision to bailout the Auto industry, claiming that the investment was way too risky, These people bring up a very valid point, the government was loaning billions of dollars to companies on the brink of going out of business, However, they fail to consider the devastation that would have come along with the collapse of GM and Chrysler. According to a study conducted by The New York Times, 1 and 10 jobs in America are connected some way or another to the “Big Three.”

Back in 2008, that would have been a loss 14 million jobs if the bailouts were not provided, It’s safe to say that Obama was right when he said “the auto industry is the backbone ofAmerica” (Obama) “The Great Recession” could have very easily turned into a second depression. Like mentioned earlier, these two companies supply millions of jobs to the American people. It’s hard to predict the total effect these 2 companies have on the unemployment rate but it’s safe to say there would have been a definite increase, which something Lhe already suffering economy just could not afford. Not only would people who were directly employed by GM and Chrysler be unemployed, but also a large amount of car part manufactures and dealership employees would have been without work. Companies like Delphi and Mopar who specialize in making parts specifically for General Motors and Chrysler would have been the first to close.

According to 0, there are thousands of part manufactures directly tied to GM and Chrysler and the ripple effect would have been devastating to the national economy. Car dealerships either would have had to switch the brands they stocked or would have been forced to close all together, Once again, the government made the right decision in bailing out the auto industry and took control of a potentially horrific economic situation According to an article published in Newsweek Global, General Motors and Chrysler both repaid their entire loan amount ahead of time and in fullt. In 2013, GM reported a net income of 4.3 billion dollars, as compared to a loss of 31 billion in 2008 (Bernasek). Not only is GM’s net income in the positive again, but they’ve come full circle As of 2013, GM is the world‘s second largest automotive producer in the world.

Chrysler Group is also doing very well, and according to an article published in TIME magazine, the company just had its most profitable year since receiving their bailout in 2009 (Frizell). This just shows how successful the bailouts were and how much the companies have evolved since receiving them This article focuses on the 2012 presidential election, but provides some very interesting information about automotive bailouts and how they specifically affected the state of Ohio. According to the article 1 and 8 jobs in the state of Ohio are tied to the automotive industry. At the time this article was written, unemployment in Ohio dropped from 86% to 7% since the automotive bailout. The article talked about how production increases in two plants specifically, the Chevy plant in Youngstown, and the Jeep plant in Toledo. Steel production in Ohio has also increased, I think I can use some of these statistics in my paper and possibly write a paragraph or two about how the bailout effected Ohio specifically, and what other industries rely on automotive production.

This was published in Time magazine so i deem it to be reliable. i would say this is article is intended for mainly business minded people. Bernasek, Anna, “Two Numbers: Obamacar,” Newsweek Global 162.5 (2014): 106—107, Academic Search Complete. Web. 5 Apr. 2014. This article talks about the current profits of specifically General Motors, and how they have quickly recovered since the government bailout. In 2013, GM reported a net income of 4.3 billion dollars, as compared to 2008, where they had a loss of 31 billion and a loss of 37 billion in 2007. The article was optimistic about GM‘s future and explained that they set a company record in 2013 by selling 9.71 million vehicles globally. At the time of this article, GM had become the 2″d largest automotive producer in the world. This article was published in Newsweek Global, a well-known business/investment magazine. The intended audience is most likely for people of a business profession.

In 2009 General Motors turned down a $2 billion loan from the government, which they originally thought they were going to need. According this this article, GM said they were making more progress than expect when it came to cutting cost. I plan on using this for my argument, by explaining that the bailout seemed to be effective since GM didn’t need to take additional bailouts. This article is probably intended for investors Frizell, Sam. “Chrysler Enjoys Strongest Year Since Bailout.” Time,Com (2014): 1. Academic Search Complete Webi 5Apri 2014 This article focused on the Chrysler’s recent earnings and discusses how this is Chrysler’s most profitable year since receiving their $1 billion bailout in 2009 It also brings up how Fiat purchased the rest of the company during the past year.

Fiat originally acquired 58 “/n of the company back in 2003 Sales are doing very well on their Jeep Cherokee and Ram models and thinks are looking bright for the future of the company. I plan on using this article to prove that the bailouts did what they were intended to do. I would say this is intended for individuals doing investment research, Holstein, William J. Why GM Matters: Inside the Race to Transform an American Icon. New York: Walker, 2009. Print This book explains the recent history of General Motors and basically explains why GM is so important to our economy. The book also explains how GM has adapted to the recent demands of the automotive industry, especially when it comes to fuel efficiency and reliability. This book specifically talks about the bailouts and offers some statistics, like how much the bailout was for and terms of the loans.

It also talks about how long it took the company to repay the money and how effective the bailout was. This book does a great job at explain why GM got into this position in the first place. Even though the book doesn’t focus on Chrysler, they do mention them when talking about the bailout, Lawrence, Jill. l’Auto Bailout Helping Obama’s Case In Blue-Collar States.” National Journal (2012): 4. Academic Search Completes Web 5 Apr, 2014‘ This article also deals with the political aspect of the bailout issue. It talks about both supporters of the bailout and people who were opposed to the bailout There are a lot of good quotes from regular people in this article that I may end up using in my paper. This article also brings up the issue of part manufactures and how the bailout ended up saving their businesses as well. This article also focuses on Ohio, Michigan, and Pennsylvania.

The intended audience is probably for someone interest in politics Saporito, Bill, and Joseph R. Szczesny, “ls GM Worth Saving?.” Time 172.21 (2008): 35-36 Academic Search Complete. Web 5 Aprt 2014 This article was written back 2008, which was before the automotive industry got the bailout It was interesting to read the different predications the article made, if the governmentjust let GM fails From the research the article presented, the effect could have been not only nationwide but worldwide. It talked about the complexities of the parts industries, and how all of them are intertwined with the automotive industry I like how the article talked about both sides of the issue and I plan on referring to some of it in my paper.

Wessner, Charles W, 21st Century Manufacturing: The Role of the Manufacturing Extension Partnership Program, Washington DC: National Academies, 2013. Print, This book goes into detail about the importance of manufacturing to the United States‘ Economyt It specifically focuses on the 21“ Century and explains how much manufacturing has changed over the years I plan on using some statics from this book to support my stance on the issue of the bailouts and why losing the “Big 3” would have been a devastation the economy, especially in the Midwest, This book was published by the National Research Council so I deem it to be very reliable academic source. This is a Very wordy book of research, and probably intended for someone studying Manufacturing.