Auto Makers Bailout Essay

Submitted By cd110683
Words: 943
Pages: 4

Political Science 101

United States Economic Stimulus Package

The US auto industry is comprised of three major automobile makers including GM, Ford and Chrysler. These companies have experienced highs and lows throughout their history. As the US economy began to slow down these auto-makers started feeling the effects as well. In the fall of 2008 the auto-makers received criticism from the public and policy makers when they requested assistance from the federal government (“Automotive Industry Crisis”). For the past two years the federal government has attempted to save the automobile industry from failing by loaning taxpayer's dollars to the auto-makers (“Automotive Industry Crisis”). As a result, public opinion has been widely mixed as to whether or not the federal government should engage in lending significant sums of money to corporations in an attempt to protect them from failure. The auto industry bailout therefore, provides us with the perfect case to study the complexities of running a bureaucracy with many different interests. The big three auto-makers approached Washington to ask for assistance because they were lacking assets and the companies were concerned they did not have enough cash to continue operating (“Automotive Industry Crisis”). The companies were losing money at a rapid pace due to high gas prices turning customers away from their products that were not as fuel efficient as their competitors (“Automotive Industry Crisis”). The companies solution was to ask for assistance from Washington for money to invest in more fuel efficient vehicles that would make them more competitive and improve sales(“Automotive Industry Crisis”). News agencies were covering the story closely and reported the CEO's of the big three auto-makers flew private jets to Washington to request loans in the billions of dollars (Levs, “Big Three auto CEOs”). The public was outraged by this report and were confused how a company requesting aid from the government spent an estimated $20,000.00 on a round trip flight versus a $500.00 round trip. After multiple hearings, the government responded to the auto-makers plea with a reported eighty five billion dollars to Chrysler and GM (Schepp, “The Old Chrysler”). The auto-makers accepted the funds within agreement to pay back in full the amount they borrowed (Schepp, “The Old Chrysler”). So far the government has received 3.9 billion dollars out of the 14.3 billion dollars that Chrysler still owes (Schepp, “The Old Chrysler”). GM has re-paid 6.7 billion dollars in loans (Krisher, “Profits raise US auto makers”). Ford did not receive any funds from the bailout and has recently reported strong profits. (“Automotive Industry Crisis”) There is now much speculation that even with two of the big three auto makers reporting high profits, there is a fear the taxpayers will not have all of the borrowed funds returned (Krisher, “Profits raise US auto makers”). Taxpayers are waiting to see how much the government gains or loses on the sale of it's stock in both GM & Chrysler, reports are showing that it could mean a loss of up to thirty four billion dollars to taxpayers (Schepp, “The Old Chrysler”). This bailout represents a significant question of whether or not the government should provide assistance to failing corporations, and also illustrates the complexity of running a major bureaucracy such as the federal government. From one perspective these major auto-makers hold such a significant place in both the domestic economy and the world stage, that their failing could have disasters implications. On the other hand, is the purpose of collecting taxes so that the revenue can be used to assist corporations instead of social programs? These questions are incredibly important to the study of political science because an understanding of the complex…