Automotive Bailout Running Head: Automotive Bailout

English 300 section 011

Dr. Judith Szerdahelyi

March 15^th 2009

Business Management

MLA Style

Should We Bailout the Big Three?

It is easy to see in these harsh economic times how a small business owner would be struggling to keep their company “out of the red” so to speak. However, it seems that the “mom and pop” operations are not the only organizations feeling the strain of a slow economy. We have all undoubtedly heard about the “Big Three’s” bailout requests over the last few months and the government’s award of four billion dollars. General Motors and Chrysler also requested over sixteen billion dollars more that will most likely be granted. However, did General Motors and Chrysler deserve the tax payer’s money they were so easily granted? Many people would argue that our economy would be nothing without the automotive industry and the amount of gross domestic profit they help provide. The automotive industry does create a lot of jobs due to the fact that they depend so highly on parts and materials from so many places to create one car. However, the loss of jobs created if GM or Chrysler went bankrupt would only be temporary. It is clear now that these companies, although they have been American icons for many years, must be allowed to fail. In coming to the US government the CEOs brought no clear plan on how they would allocate granted loans, how they would cut costs to prevent further need of more money, or in what time manor they would be able to repay the loans granted. Also if these companies were treated like others in our economy and allowed to fail, their absence would recreate a market niche that would soon be filled by someone with the resources and ability to produce vehicles without going bankrupt. Our country’s economy was founded on the idea of capitalism and by bailing out these companies we are getting away from a most basic principle of capitalism, which is that a good business plan with good leadership will prosper and a bad business plan with poor leadership will fail.

Every person who has ever applied for a loan knows that the lender they choose will undoubtedly base the decision of whether or not that individual will get a loan on certain financial information. For instance, the lender will want to look at their financial history, ask the borrower how they plan to spend the money, and what type of time frame the borrower experts they will need to pay back the loan. Given that this sort of information is standard to establish any lender and borrower relationship, why would the CEOs of Ford, General Motors, and Chrysler not prepare all this information like any person would before asking for a loan? “The Big 3’s leaders thought they could get whatever they wanted from Congress.” ("The auto industry bailout: When the Big 3 went to Washington." 7) The CEOs of the big three, Wagoner, Nardelli, and Mulally, came to Washington looking for a handout. However, our government would not lend blindly to an unprepared borrower. The government questioned the CEOs on how exactly they had been spending their own money and what their plans were with the loan if it were granted. None of the CEOs had a solid answer. Instead of Congress rejecting the company’s request for a loan immediately, much like any bank would have done to an equally unprepared small business owner or individual who showed up the same way, congress instead decided to give the CEO’s twelve days to come up with the answers and prove that they had a plan to fix their ailing companies. By not coming into the congressional hearing prepared the CEOs of the big three auto makers truly showed the American people how they were running their businesses. However, even after the big three showed congress that they were unprepared and not even sure how they would spend the bailout they begged for, congress granted these companies the loan they were seeking. Although congress did award the big three some bailout loans, any future requests should be denied by congress and if the denial causes one or more of these companies to fail then they must fail.

In the business world a strong business with good leadership will survive throughout hard economic times due in part to exceptional leadership and strong planning abilities. The Detroit auto makers have not shown the American people that they are a strong business and have on more than one occasion shown the world the lack of leadership their companies posses. Many people fear that a loss of one or more of the big three will cause a catastrophic job loss cycle that this country has never seen, however this would not be entirely true. The loss of any of the big three would cause job loss in America through those who directly work for any of the three but also for those who work indirectly through companies that provide materials used in producing cars. Although this job loss could be significant it would only last for a short time due to the fact that without the big three the automotive industry would lose a major amount of competition leaving a market niche wide open for new entrepreneurs to try their hand in the auto industry. Soon a new American car company would take shape and those forced out of their jobs by the collapse of the big three could be back working the same job under a new company name. By allowing the big three to face bankruptcy like many other businesses have faced in the recent past a new and revitalized American auto manufacturer could be born, one that learns from the mistakes of overspending and unattainable pension plans that the auto industry now faces.

Capitalism is defined as an economic system in which the means of production and distribution are privately or corporately owned. Granted the big three with their bailout money would still be privately owned this definition also means that companies are on their own when it comes to any type of decision or task whether it be financial or not. Therefore for our country to stick to its traditional capitalist beliefs we must not let our government interfere with this free market. The big three have had their chance to make their businesses prosper and have ultimately failed, now it is time for these companies to either revamp their business plans and turn their companies around or face the final solution of bankruptcy that all other failing businesses have had to face. Without the government’s aid one or all three of the Detroit auto makers could fail, but by handing over billions of tax payers’ dollars we have taught these companies that there is no consequence for poor business management and weak financial planning. Many companies are facing tough decisions on how they can keep their doors open while the big three sit in Washington begging for more money. If the auto industry needs a loan to keep from having to close their doors they should be forced to seek out the help of private bank like any citizen or business owner elsewhere in the United States. As a company in a capitalist market the CEOs and owners must realize that failure was a risk that was taken when the company was started but now as that risk seems to become more and more a reality they must be motivated to change their companies from the inside and fix their real problems instead of turning to the government and ultimately the American people for help.

The future of the Detroit automakers is unforeseeable, however if the upper level managers cannot come together to formulate a plan on how to turn their companies around there are no amounts of loans or bailouts that will save them from ultimate and inevitable failure. Even with this multibillion dollar bailout, if this poor management continues, the Detroit automakers will be back on congresses doorstep all too soon asking for another handout. These companies don’t need a loan, they need a complete reworking of funds and a financial plan that will focus more on benefitting the company and less on filling the pockets of the big three’s CEOs.
Works Cited

Altman, Edward. "Where Should the Bailout Stop?" Financial Markets, Institutions, & Instruments 18(2009): 185-86.

Cobb, Chris. "A Daunting Challange: The Big Threes Uphill PR Battle for Survival." Public Relations Tactics 16(2009): 10.

Mark Edmund. . “The Big Three: Will a Bailout Be Enough?” Quality Progress 42.1 (2009): 14- 15. ABI/INFORM Global. ProQuest. Western Kentucky University Library,