Government Bailout of Auto Industry - the Big Three Still Remain

The Big Three Still Remain

If it were not for the United States government bailing out the Big Three, they probably would have gone belly-up. Future generations would only know the Big Three by the classics. The Big Three or "Detroit" are the American car companies, General Motors, Ford, and Chrysler, originating out of Detroit, Michigan.

In the fall of 2008, the Big Three were facing some very challenging times. Although this was not the first time, it was the largest by far. Trouble began at the beginning of 2001 when the price of oil began to rise again. The Big Three's fortunes began to sink, a trend that was compounded by the economic slowdown that began in late 2007. Despite shedding more than 100,000 jobs since 2006 and closing factories nationwide, the Detroit automakers had not been able to cut their costs fast enough to keep up with the steadily declining market for new cars and trucks (New York Times 1).

General Motors, the top American auto maker, closed plants, cut jobs, and even considered a merger with Chrysler. It still was not enough. They had eventually taken advantage of the government bailout with the United States government owning sixty percent of their shares (New York Times 4).

Ford, on the other hand, was not doing so badly until they got hit with exploding Firestone tires on its Ford Explorer, the most popular sport utility vehicle in the country at the time. They restructured and put many of their assets up as collateral. Ford was the only automaker out of the Big Three not to take advantage of a government bailout (New York Times 5).

Chrysler is the smallest of the Big Three. They also had to cut jobs and restructure. It too was not enough. The company was forced to complete a partnership deal with Fiat. With that still not being enough to keep the company going, Chrysler filed for bankruptcy in April 2009, becoming the first American automaker to do so since Studebaker in 1933 (New York Times 6).

Now, several years after the bailouts, there comes success. Although there were many critics, most today would contend that it was the right decision. The government appears to recoup all but approximately $13 billion of the $82 billion it put into the bailout. That loss is nothing to sneeze at but it's a lot better than the $108 billion to $156 billion the government would have lost over three years had it not intervened, according to the Center for Automotive Research, a Detroit-based think tank (USA Today).

Works Cited

"Automotive Industry Crisis." Times Topics. The New York Times, 25 May 2011. Web. 15 Feb.

2011.

"Critics Hate to Admit It, But the Auto Bailout Is Working." USA Today 16 June 2011, News,

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