Auto Bailout
In the years leading up to the auto industry bailout, all of the so-called Big Three automakers were struggling. They had been losing market share for many years as more import companies had entered the American market. Some of these companies, notably Honda and Toyota, were able to deliver better cars at lower prices, putting the Big Three at a significant competitive disadvantage. While the automakers had some good years, by the last 2000s they were losing money. They did not have competitive products, and were saddled with substantial retirement costs. These companies had tens of thousands of employees at one point and need to pay retirement benefits to those workers; the problem is that there are fewer workers today because of automation to cover those benefits. The automakers headed for bankruptcy, and successive contract restructurings with the unions had failed to reverse the trend. The federal government stepped in to orchestrate the bankruptcies and restructuring of General Motors and Chrysler, while Ford opted out of the program.
Political Pressures
There are a number of different stakeholder groups that were exerting political pressure on President Obama to save the automobile industry. The most important stakeholders were within the industry itself. These included the unions, the companies, the retirees, auto industry suppliers and of course consumers who would face a lack of choice should these companies have failed. The Bureau of Labor Statistics notes that the auto industry in the United States contributes some 3 million jobs from the automakers, suppliers and dealers. While Ford and some foreign automakers would still exist, the closure of General Motors and Chrysler would have resulted in the loss of hundreds of thousands of jobs. This was at a time when the unemployment rate was pushing on 10% and threatening to go above that barrier.
The loss of auto industry jobs would have been particularly catastrophic in so-called "Rust Belt" states like Michigan and Ohio, both of which happen to be swing states. So handling the automobile industry...
fiscal and monetary policy. On the most basic level, the primary difference between fiscal and monetary policy is that fiscal policy pertains to the actions of the federal government designed to influence the national economy through government spending and taxation while monetary policy refers to the actions of the central bank to govern the money supply. Tight or restrictive monetary and fiscal policy is used to curb inflation; a liberal
The other important function of the plan was to shift responsibility for the pension obligations from the company to the United Auto Workers. While smaller creditors and contractual partners need not be satisfied with the reorganization, it is difficult to believe that the reorganization could have been done with the cooperation of the UAW. It would not have been politically expedient for the federal government to become involved and without
2007 Economic Crisis on American Car market Effect of the 2008 global economic crisis on automotive industries Crisis in the United States Crisis in Canada Crisis in Russia Crisis in European markets Crisis in Asian markets Effects by other related crisis events In this paper, we will review the effects of 2008 global automotive crisis. Our main focus will be on the American car manufacturers and the negative impact they suffered due to the crisis. We will
(Reich, 2009) The Japanese Government to Business Model The Japanese government has more direct control of private business. The difference is that it is doing so, as a partner to ensure that the business is able to maintain successful long-term economic growth. The government does not offer subsidies or any kind of bail outs. Instead, they help companies through loans, tax breaks and other forms of assistance. This helped to contribute to
Ford World Automobile Industry 2009 Which companies are likely to be most successful over the next five years? The companies likely to experience the greatest market success in the coming years are those that find a way to simultaneously innovate and, in the case of the Detroit Big 3 especially, find intuitive ways to reduce their capacity. Something that the case study published in the text by Grant (2009) makes quite clear
As banks faltered and default rates rose, rates of consumption and demand plummeted. Unemployment began to increase, and in a predictable Keynesian fashion, as individuals grew more insecure about their job prospects they began to spend less money. The United States has a particularly consumer-driven economy -- Americans are known for having historically low rates of savings and to engage in high rates of spending -- so this was
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