rates of employment and the middle class economic group would emerge. The automotive manufacturing industry saw great advancement and wealth until the near collapse of the “Big Three” in the early 2000’s, which led to a federal bailout. The federal bailout prevented the impending collapse of the auto industry; which would have caused a severe disruption to the economy. It would have taken a major downward hit, as the auto companies would have had to liquidate assets. The liquidation would have eliminated thousands of jobs at the respective companies, as well as at suppliers and dealers. The bailout requests of General Motors and Chrysler began with George W. Bush’s presidency and were upheld throughout President Barack Obama’s administration as a solution that could strengthen the economy and allow the companies to return to a state of profitability. “The federal government set new auto efficiency standard to force the companies to be more competitive against Japanese and German firms, such as Honda and Toyota. In return, it bailed out both companies by loaning them enough to stay afloat. It also provided incentives to spur new car purchases. In effect, the government nationalized the two auto-makers just as it did AIG , Fannie Mae, and Freddie Mac with the housing market collapsed”. 2 “In accepting the bailout, the companies promised to fast-track development of energy-efficient vehicles and consolidate operations. General Motors and Ford agreed to streamline the number of brands they produced. The United Auto Workers union agreed to accept delayed contributions to a health trust fund for retirees. The companies also agreed to reduce 2 Amadeo, Kimberly. (2016, November 25). Auto Industry Bailout (GM, Ford, Chrysler) – Was the Big Three Worth It. Retrieved from 4
The Affordable Care Act payments to laid-off workers. In addition, the three Chief Executive Officers agreed to work for $1 a year and sell their corporate jets. 2 In 2007, GM lost $450 billion and in 2008 saw its sales decline by 45%; while Chrysler dealt with a decline in sales of more than 30% and the inept management of Cerberus Capital. 3 “On December 19, 2008, President George W. Bush announced that he had approved the bailout plan, which would give loans of $17.4 billion to United States automakers General Motors and Chrysler, stating that under present economic conditions, allowing the United States auto industry to collapse is not a responsible course of action.” 4 The federal government created the Automotive Industry Finance Program, which provided loans for operating cash to General Motors and Chrysler. In
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