Extended Essay

General Motors is faced with a dilemma. In the face of economic depression, competition from foreign players was driving down profits and the market’s preference was changing to efficient cars due to

In the latter part of 2008, the United States’ economy was rapidly plummeting - the stock market crashed, the housing bubble burst and gas prices skyrocketed. The majority of U.S. based firms faced the reality that they would not be able to survive during such desperate economic times. The U.S. automobile industry, in particular, began to buckle under the depressed economy. The government stepped in proposing a multi-billion dollar bailout to stimulate the economy and restore economic balance. The possibility of this unprecedented government intervention was condemned by many economists. If the government helped the ailing automotive industry, this industry would have to tighten their expenditures and plan for the future to prove to

Ford’s F-Series experienced a 46% drop in sales for 2006 compared to 2007, making a once most wanted truck in the United States almost abandoned by the consumers. The second and the current recession that began in 2007 brought a new wave of impact on the auto industry. At the time banks were more flexible with approving loans and the interest rates were low which attracted a lot of consumers into the housing market. Since many of them were not able to afford it, eventually they turned to foreclosure leaving them with debt and no credit worthiness; thus, banks started raising the interest rates on auto loans. But foreign competition, higher oil prices, and higher interest rates were not enough to destabilize the auto industry on such a scale; it was the recession that shocked it the most.

In 2008, the auto industry lost millions of dollars daily due to a deficit in auto loan financing. Years of collective bargaining with unions and a lack of fuel efficiency incentives caused the heartbeat of the big three auto industry to nearly flatline. These problems left them with only two alternatives, face bankruptcy or accept a resuscitation life line.

Concerns about energy were not high on the list of American priorities, but that situation was about to change dramatically. As a result of the OPEC oil embargo the price of oil has risen from 3 dollars per barrel to nearly 12 dollars per barrel globally. US prices were significantly higher. The domestic oil industry could not make up the shortfall in supply caused by the embargo this led to rationing and long lineups at gas stations some up to four miles’ long. The average domestic price of gas climbed to 83 cents per gallon from 38 cents per gallon. Sales of smaller, more fuel efficient cars sky rocketed. At the same time declining demand for the big, heavy gas-guzzlers that most American car companies were producing spelled disaster for the domestic auto industry . During this period U.S. GDP fell 3.2 percent the ensuing recession marked the end of the general post World War II economic boom. This recession differed from previous recessions in that it began with stagflation, where high unemployment coincides with high

The biggest economic factor that affected the automobile industry is the global recession of 2008-2009. During this timeframe, many homeowners purchased homes they could not afford thinking that house prices would raise and in reality the prices fell, which led to foreclosures across the nation. Thus, many banks lost money due to financing home loans, which further caused several banks to be bailed out by the government. Once the home market crashed, Americans stopped spending money on luxury items such as cars and focused more on necessity purchases.

In recent years, the global recession has made a huge impact on the company cash flows and its financial situation. To sustain as a global leader in the highly competitive automobile industry the GM needs to have its own strategic plan to produce the next generation of vehicles and it has got no time to delay. This is a crucial time for automobile industry with many threats, but opportunities as well. The company has to choose the best "opportunities" to overcome the "threats" and "weaknesses" using its "strengths". The next several years will redefine

us that are old, enough to remember how the Big 3 automakers almost collapsed back in the late 70's, early 80's, the world was made aware of the troubles in these plants. The autoworkers seemed to be sucking the companies dry with their extravagant labor agreements, while their levity, quality and design of their product was lackluster. The oil embargo that OPEC orchestrated also revealed a problem with U.S. automakers, they were unwilling to adapt to the changing environment around them. Meanwhile the Japanese automakers were busy making fuel-efficient, smaller, less expensive vehicles; the Big 3 resisted this change with their very fiber. They continued to crank out their muscle cars, and their gas-guzzlers. Consumers lost confidence in the U.S. automobile and quickly switched to the cheaper more fuel-efficient Japanese models.

General Motors Company has played a pivotal role in the global auto industry for more than 100 years. However in 2008, it was almost brought to its knees by a major recession and global credit crisis that drove car sales to near depression levels and dried up private sources of capital. This paper attempts to review what happened to General Motors while analyzing the macroeconomics of its corporate operations.

The automotive industry has been one of the factors of trade between several countries that became very important to the United States trade market. The industry took a heavy hit when the economy crashed in 1929 forcing car industry sales to go down. The fall of sales with automobiles created havoc in other industries as well. The domino effect began to take effect on other business such as oil and gas companies. People stopped by oil and fuel when they couldn’t afford to use their automobiles. People couldn’t get to work which had a huge factor on employment and loss of jobs. This paper will discuss the huge effect it had with other areas of the

As cited by the Bureau of Labour Statistics, ‘the automotive industry includes industries associated with the production, wholesaling, retailing & maintenance of motor vehicles’. This industry has had an immense impact on the domestic industry. Nevertheless, with the 2007- 2008 recession, new car sales decreased rapidly reflecting the overall decrease in consumer spending. Thereafter with the aid of government, in early February, 2012 the American Automotive Industry made a brisk recovery, making American automotive companies reign as the biggest & most profitable & it incrementally grew year after year.

The American automotive industry has led the American economy for many years. This industry has shaped our development, and influenced American culture and social mores. Now, ensnared by globalization and other dominant factors, it faces a difficult reality. The American automotive industry significantly impacted the lives of Americans. Detroit’s “Big Three” had the most significant roles in this. Chrysler, Ford, and General Motors were American symbols. They are credited for a significant percentage of all American jobs; they put numerous blue-collar families into the middle class, and helped America cultivate into the giant of the twentieth century. Unfortunately, the fabled automotive firms are not what they once were and are traveling

The international automakers invested more than $72 billion to capitalize 425 facilities and offices. This created jobs for 123 thousand Americans with $9.3 billion and products purchased from US suppliers for $104 billion to produce 5.3 million vehicles in which 46% of all US vehicle production. There are nearly 10 thousand dealership franchises sold that employ more than 500 thousand American gaining $29 billion. Further, nearly 900 thousand US-built vehicles were exported. These figures clearly shows that there has been a domino effect of success in the US auto industry and it means that it is a great contributor to the US economy.

In 2013, Detroit shined again, and combined came in higher than its global competitors. Research showed U.S. car companies held 46% of auto sales and this surpassed the competition in Japan, Germany and Korea (Wood, 2014). Detroit automakers were nearly destroyed in 2009 when hit by a crippling recession. The American tax payers bailed the companies out, and they have recently started to show the growth it takes to succeed and be number one. The recession has also forced the American auto industry to become more efficient and competitive. It has overall decreased the number of employees and reduced costs in other ways to protect the company’s well-being and the taxpayer’s investment.

Overall, the Canadian government’s bailout of these automobile manufacturers was a mistake. Not only is it illogical to financially reward a company that reacted poorly to economic uncertainty, it also creates an immense moral hazard. Since the rescue package has done very little to protect Canadian jobs and goes against public and expert opinions, it only seems to be benefitting the executives that created a need for the bailout in the first place. As a result, automobile manufacturers as well as other corporations will begin to believe that no matter how many bad