Auto Bailout
The automotive industry has been suffering through an incredible crisis since the 2008 calendar year and is more than just a crisis in the United States. The effects of the struggling economy are being felt worldwide throughout thousands of different business industries, especially the automotive industry, and the auto world is hurting across the world. The automotive world began their struggles in the second half of the 2008 calendar year and it has gone into a downward spiral ever since. General Motors released information late in the month of February of 2009 that they plan to lay off over 47,000 workers and cut down on a dozen or so of their plants by 2012. Automotive manufacturers are hurting in the United States, Canada, Japan and Europe alike.
The automotive crisis began in part because of the gasoline price crisis that occurred from 2003-2008. The high gas prices that the world suffered through reduced the amount of Sport Utility Vehicles that were purchased by motorists across the world because Sport Utility Vehicles cost a lot of money to have the gas tank filled. Sport Utility Vehicles do not get a lot of great gas mileage and very few miles to the gallon. The main market of the Big Three automotive companies, General Motors, Ford, and Chrysler, are Sport Utility Vehicles. The market share of the Big Three has declined greatly from 70 percent in 1998 to now 53 percent in 2008. The state of Michigan has been hit the hardest from the economic crisis of the automotive industry. Many automotive manufacturing companies across the country and the world have had to shut down manufacturing plants and cut thousands of jobs to save money. Before the financial crisis began, it is estimated that General Motors lost over $51 billion three years prior to the crisis.
The Big Three of the automotive industry have avoided bankruptcy so far but had a hearing on the automotive crisis with the United States Senate discussing how the Big Three can avoid filing for bankruptcy. The Big Three recommended to the Senate that they need over $25 billion in relief aid for them to avoid bankruptcy. If the auto industry were to fail, Rick Wagoner (the head of General Motors), claims that close to 3 million jobs will be lost. In early December of 2008 the Big Three resubmitted a new proposal to the United States Senate that included a $34 billion relief bailout package, up from the original $25 billion. General Motors asked for $4 billion of that money immediately and Chrysler needed $7 billion of that money by the end of the month to stay alive.
Former President George W. Bush approved the automotive bailout in late December of 2008. The bailout gave General Motors and Chrysler with over $17 billion in loans. General Motors received just over $9 billion and Chrysler received $4 billion up front. Both were to split another $4 billion in February of 2009. The money for the loans came from the Emergency Economic Stabilization Act of 2008.
We are all hoping that our economic situation stabilizes real soon.
