Relative to the other two manufactures in the Big Three, Chrysler is the smallest. However, Chrysler was in such a bad financial position that without some kind of assistance it was virtually inevitable the company would have to file for bankruptcy protection (Bury, 2012)
The government insisted that Chrysler cut fifty-thousand more jobs in addition to the voluntary reductions that the company already conducted. Chrysler was also forced to discontinue producing three of its product models: the PT Cruiser, Dodge Aspen, and Dodge Durango (Herbert, 2008)
On a strictly financial measure, the investments made to the private sector have yet to payoff to the public. The current stock prices would need to roughly double in order to match the investment made so that tax payers would break even (Isidore, 2012)
As a result, the government's intervention came with a whole slew of strings attached including a specially appointed "Car Czar" whose job it is to oversee the investment activity on behalf of the tax payers. GM's Role General Motors has long been the largest auto manufacturer in the world, however after the recession started taking its toll the company's number one position was snatch by Toyota (Marr, 2009)
Much of their sales success could be attributed to growth in developing economies as well as growth in Europe. The company actually had many record breaking performances by many of the different brands in several key markets (Neff, 2008)
For example, General Motors was requested to close nine factories and also slash roughly two hundred thousand people from the payroll. Furthermore, the manufacture had to drop Pontiac, Saturn, as well as Hummer which was eventually spun off to Chinese owned group (Smith, 2009)
When the recession emerged, most notably the credit crunch, consumer demand was devastated and this worked to point out many of the weakest links in GM operations. GM had comparatively inflated car prices in regards to competitive value which was at least partly due to the high wages that the company paid for its domestic workers (Vohwinkle, N
By the first quarter of 2009, the recovery in the banking system had already begun, with prominent investment banks recording record first quarter profits. The profit recovery masked underlying economic weakness, however, as millions of consumers were still defaulting on their mortgages and the commercial real estate market followed the residential housing market into recession (Dash, 2009)
" Banks, free to lend knowing that their debts were covered by the federal government and having easy access to money, did not lend. The Treasury and Federal Reserve added another $800 billion to the effort, but again this did not spur lending (Goldman, 2008)
This bailout was priced at $700 billion and was intended to stabilize the financial system, in effect stabilizing the economy (Stout, 2008). While the bailout has ultimately proven to cost less than $700 billion as the result of strong returns (Onaran & Leondis, 2010; Faler, 2010), the plan did not have the desired impact on the American economy at large
Today, we see the lingering effects of the bailout. On Wall Street, profits have been restored and bankers are once again earning handsome paychecks on the back of rising stock markets, but on Main Street the recession remains (Smith, 2010)
This situation led to the first Wall Street bailout in September, 2008. This bailout was priced at $700 billion and was intended to stabilize the financial system, in effect stabilizing the economy (Stout, 2008)
There are indications that the money the banks took from the government in exchange for their bad debts was not used to invest in the American economy. There is evidence that Wall Street was speculating in oil futures (Wallace, 2009), and it was also noted that the credit crunch persisted even though the banks no longer held their "toxic assets
No sooner had Barack Obama been elected when House Speaker Nancy Pelosi was on NPR calling for a bailout of the U.S. auto industry (Langfitt, 2008)
Bailouts The issue of bailouts has incited no shortage of controversy in recent months. The first major bailout was the federal government takeover of insurance group AIG in September at a cost of $85 billion (Karnitschnig et al
AIG The insurance group AIG was taken over in an $85 billion bailout in September, at a time when financial services industry seemed on the brink of collapse. The underlying assessment is that the action was necessary, in order to bring confidence back into the financial markets (Mitchell & Smetters, 2008)
Congress approved a $25 billion bailout at the time but by November the automakers were lobbying for another $25 billion (Langfitt, 2008). They, too, found controversy when the CEOs of the automakers flew private jets to Washington, DC to make their plea of poverty (Ross & Rhee, 2008)
Such a failure could cause a chain reaction throughout the automotive industry affecting everyone from suppliers to dealers to mechanics. The result could be catastrophic -- 3 million jobs and $150 billion in tax revenue lost (Krisher & Thomas, 2008)