The Unpopular, Successful Auto Bailout

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The Unpopular, Successful Auto Bailout

Imagine this ----- GM, FORD AND CHRYSLER – The three pioneer automakers of U.S going bankrupt! This would have been an absolute reality if Mr Barrack Obama had not decided to let the world and specifically American citizens to continue being associated with the major U.S automaker brands. In December 2008, the three major U.S. auto industry companies -- GM, Chrysler and Ford -- asked the government for a $34 billion bailout to avoid bankruptcy. The Big 3 stated that their demise would trigger 3 million layoffs within a year, plunging the economy further into recession. The answers to if and why the bailout was necessary then made its requirement felt in the U.S. Intersecting opinions and difference in perception of the consequences created a furore. In December 2008, auto sales had dropped 37% compared to a year earlier. This was 400,000 fewer vehicles, or the equivalent of two factories' annual output. GM and Chrysler had the worst decline, while Ford's loss was about the same as industry leaders Honda and Toyota. However, many in Congress accused the auto-makers of not operating competitively for years. The companies delayed making alternative energy vehicles, instead reaping profits from sales of SUV's and Hummers. When sales declined in 2006, they launched 0% financing plans to lure buyers. Union members were paid $70 per hour, on average, while new hires made $26 per hour. GM had twice as many brands as needed, and twice as many dealerships, thanks to state franchise regulations. For them, the bailout was needed to restore the U.S. auto industry to global competitiveness. In January 2009, the Federal government used $24.9 billion of the$700 billion bank bailout fund to rescue two of the Big 3: * $17.4 billion for General Motors and Chrysler.

* $6 billion for GMAC.
* $1.5 billion for Chrysler Financial.
How you saw this series of events depended a lot on where you stood politically. If you were a...
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