January 30th, 2013
Vroom Vroom! This is the welcomed sound that automobile owners and manufacturers like to hear. It is the sound of completion, success, and satisfaction. But what happens when this sound is drowned out by weakened profits, customer dissatisfaction, and industry weakness? In comes the government bailout of the automobile industry. In recent years, 2008-2010, Ford, GM, and Chrysler had to be saved from self-destruction and bankruptcy through government incentives, loans, and emergency funding. In December of 2008 these 3 automakers asked the government for monetary assistance that totaled approximately 34 billion dollars (About, 2013). Ford, GM, and Chrysler asked for these funds to avoid impending job layoffs in the millions and also to avoid further financial trouble for the economy during the recession (About, 2013). All three of the car companies that had to be bailed out were American based and had for years been facing stiff competition from foreign car makers especially Honda, Hyundai, and Toyota. During this time there was quite a bit of finger pointing and blame being placed surrounding the reason for the failure of the American car industry. Was the failure based on external factors such technology, political/legal parties and organizations, or economic issues (Hitt, Ireland, Hoskisson, 2013)? Or was the failure of this industry based on internal factors such as marketing, physical facilities, and organization capabilities (Hitt, Ireland, and Hoskisson, 2013)? This paper will focus on Chrysler before the bailout and the reasons why the bailout was necessary for this corporation. Again, please remember that this paper is based on Chrysler pre-bailout and pre-merger. Founded in 1925, Chrysler began as a company known for its sturdy and reliable cars. As the 3rd largest auto company in Detroit, MI Chrysler has seen its share of peaks and valleys both financially and popularity wise. Chrysler hit its first major financial crisis in 1970 when it asked for its first congressional bailout. The company was able bounce back and repay the loan in the 1980’s and also experienced a period of financial and brand success with the reinvention of the company through new product offerings such as the Minivan and the K-car (NewYorkTimes, 2009). This brief period of success prompted Chrysler to buy the 4th ranked (at that time) American Motors. Unfortunately, this acquisition did not prove to be beneficial and the company was yet again faced with a financial crisis. Again after this period of financial instability the company saw a brief period of success during the 1990’s that saw the manufacture of the Dodge Viper and the Jeep lines of automobiles. During this success Chrysler was bought by Daimler-Benz of Germany and spent the next few years as part of this company. However, again in 2007, as if following some sort of circular financial pattern, Daimler-Chrysler ran into financial hardship and was forced to look for another buyer. The investment firm Cerberus Capital Management, bought out the company and proceeded to revitalize the company both internally and externally (NewYorkTimes, 2013). This last effort to save Chrysler proved to be too little too late and as a result the company found itself in line with the other 2 major automobile makers, Ford and GM, asking for a government bailout in November of 2009. 1. Choose the two (2) segments of the general environment that would rank highest in their influence on the corporation you chose. Asses how these segments affect the corporation you chose and the industry in which it operates. Of the six segments of the general environment, the political/legal, economic, and technological segments (yes three) rank the highest in their influence on Chrysler. * Economic: When considering opening or maintaining a business in any industry one of the...