Motor City or Bust The American citizens have faced trying times and even tougher sacrifices in the last few years. The stock markets crashed, a severe housing crisis evolved, and then there was Motor City. The Motor City was on life support and needed financial rescue like never before. There was no mystery involved for the ridicule and objections to investing more money into the very hands of top executives at the root of a corporation’s demise. Head officials faced a crucial decision in which 70 percent of Republicans alone and 61 percent of the citizens opposed providing bailout money to the falling Motor City. As rational as it may have appeared to not show support for this decision, the bailout was actually essential. There were many approaches as to how Motor City could have been revived, yet it was a difficult decision for the American citizens watching their hard earned, taxpaying dollars fund a failing company. When markets fail, as they did for both autos and banks in 2008, government should have the ability, in fact, the obligation to step in. In fall 2008, Chrysler, Ford, and General Motors (GM) Corporations known as the “Big Three” or “Motor City,” headed to Washington asking for Federal Emergency Funding in the form of tax payer’s money. The CEOs of these management blunders didn’t ask for millions, instead, they asked for an unaccountable $34 billion in help. With the fiscal and the housing sector already in a tailspin, in the eyes of the public there couldn’t have been a poorer time or worse business to support. Consequently, Ford took on a more suitable in-house solution not requiring a handout from the government. One of the major reasons for the auto industry crisis was years of market share losses by the Big Three. As recent as 10 years ago they had about 70% of U.S. auto sales, in 2008 they had 47% (Isidore, 2008). Another blow came in the form of record high gas prices, which deeply cut into demands for pickups and SUVs. Observers blamed executives for over producing those gas-guzzling SUVs and pickups and ignoring the fuel-saving technologies of their Japanese rivals. Republicans believed that the American automotive industry, with its shrinking market share, is in part inefficient from poor managerial decisions and lack of ingenuity, but mostly from the back-breaking labor agreement with the United Auto Workers Union (Zeigarnik, 2008). While there remained several other car makers that luckily didn’t share the same misfortune as the Big Three, letting these corporations fail really wasn’t a practical option for yielding positive results for the economy. If the companies were sent through a “managed bankruptcy” financed by private capital, as suggested by presidential aspirant Mitt Romney, there would have been even greater challenges. Private investors would have had to be willing to pick up the debt. In late 2008 and early 2009, when G.M. and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines. Even after diligently speaking to all conceivable providers of required funds, not one had the slightest interest in financing those companies on any terms (Bowmer, 2011). Fundamentally, the U.S. stood at a crossroads. If the government had allowed G.M. and Chrysler to collapse, the shut downs would have echoed through the entire auto sector and beyond. Before the automotive meltdown, Chrysler claimed to employ 100,000 workers in 50 states, held about 4,000 dealerships with 6,000 suppliers. Direct employment in manufacturing and warehouse facilities was just over 60,000 in 16 states. Additionally, Chrysler employed 9,350 manufacturing workers in Canada plus another 5,711 factory workers in Mexico. Meanwhile, GM reported it had 47 manufacturing and warehouse facilities in 13 states, 21 of those in Michigan. Working in those facilities were 82,849 employees. GM also claimed to
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…
GENERAL MOTORS BAILOUT PROBLEM
Founded in 1908, General Motors has been one of the largest corporation and the second largest automaker in the world coming after Toyota. For 77 consecutive years from 1931 to 1908, GM has been a leading automaker and marketer as ranked by the total number of units sold yearly. General motors have also been a leading employer not only in the United States but also in other parts of the world where it operates. However, the company has been seriously…
The automotive Industry is a significant contributor to the United States’ economy. Three of the main players, often referred to as the Big Three, are Ford, General Motors, and Chrysler.
The Ford Company, founded in 1903 by Henry Ford, is an American automaker headquartered in Dearborn, Michigan. The Ford Company sells automobiles and commercial vehicles under the Ford brand and luxury vehicles under the Lincoln brand. Ford also owns Troller, a Brazilian SUV manufacturer, and…
The Automobile Industry
John Anderson, Kevin Kwong, Jake Little
The auto industry has been quite volatile over the last decade. It was arguably the hardest industry hit by the recession, but it has climbed back with the rest of the economy. However, the outlook for the “Big Three” US automakers (Chrysler, Ford, and General Motors) is not as promising as the Asian automakers (Toyota, Honda, Hyundai, Nissan). The Big…
The automotive industry in the United States is dominated by five firms, being General Motors, Ford, Honda, Hyundai, and Toyota. These companies assemble automobiles and manufacture chassis, and together these companies make up 70% of the total market share of a $102 billion industry that has 202 companies (refer to figure 1). The types of vehicles the car and automotive industry produce are cars which include mid and full size sedans, sports…
This research looks at the General Motors Company and what led to company failure and filing of bankruptcy in 2009. The American automotive industry was poorly managed for years and was almost eliminated when the economy crashed in 2008. Without the help of the U.S. government, General Motors and Chrysler would not have been able to survive. How did GM, as the number one auto manufacturer and seller, go from being at the top to almost ceasing to exist? This kind of financial mess usually…
The change of American automobile industry
St. Thomas University
Feb 20, 2013
Bing Bai, Department of Business, St. Thomas University
This research was supported in part by a grant from the BUS 673 management writing & reporting class.
Correspondence concerning this article should be addressed to Bing Bai, Department of Business, St. Thomas University, 16401 NW 37th Avenue…
General Motors Company was founded on September 16th, 1908 by William C. Durant. Durant was previously the owner of a company which led the horse drawn vehicle industry. When General Motors was founded, the headquarters was initially in Flint, Michigan. General Motors was a holdings company which quickly collected more than twenty different motor companies. Companies such as Oldsmobile, Pontiac, Cadillac, Buick, Opel(a German auto company), Chevrolet, and several others. Eighteen years after the…
Moreover, in 2008, Mortgage companies Fannie Mae and Freddie Mac bailout. Fannie Mae and Freddie Mac hold or guarantee more than $5 trillion, or half, of the nation’s mortgages, became government agencies again.
According to About News, November 2008 was the end of investment banking. Goldman Sachs and Morgan Stanley…
share of the automotive market all over the world. However, as the spreading of the financial crisis, the GM company has shown a deficit of 15.5 billion dollar during the second quarter of 2008, which set a new record for the automotive industry’s quarter deficit in the world; the Ford company has shown a deficit of 15.3 billion dollar during the past two years; and the same terrible continuous losses also appeared in the Chrysler company.
Even if under this situation, the auto industry workers refuse…