The Primary Cause Of the FAilure

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1. Do you think the primary cause of the failure of the two companies that led to the bailout was a management failure, a worker failure, a shareholder or customer failure, some other reason, or a combination of the above? Why is that the case?

General Motors was founded by William “Billy” Durant on September 16, 1908 and has several brands under names such as Chevrolet, Cadillac, and Buick. Chrysler was founded by Walter Chrysler in 1925 and it also has many brands such as Jeep, Dodge, Ram, and Fiat. These are two of the biggest American carmakers in the United States and their demise was hard to comprehend. I think there are many reasons that collectively led to the failure of both GM and Chrysler.

One of the causes for the demise of both companies was management failure. Management is supposed to lead by making the right choices for themselves and their customers. Management failed to set up financial policies that would benefit their companies in the long run. The financial meltdown of Wall Street led to a national crisis, which made GM and Chrysler unable to borrow money to keep them afloat. The financial meltdown trickled down to consumers who were not able to get loans either to purchase or lease cars. The financial meltdown and car sales having been at their lowest point in a decade is the reason that GM and Chrysler had to file for bankruptcy.

GM and Chrysler’s management also failed to anticipate the rise of energy prices. Gas prices skyrocketed to almost four dollars a gallon and with the fragile state of the economy, it made people very conservative about their driving. The rise of gas prices was almost like a death sentence to Chrysler and GM. They have relied on the sales of sport utility vehicles or SUVs as their main source of income. The sport utility vehicles carry an already high price tag and when you add the gas prices you get vehicles that nobody wants to purchase. People wanted to get rid of their SUVs because they just cost too...
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