Economics Ch 3- Article: Pass The Plate

With all the economic turmoil of late, many problems have come up for company owners. These companies include car makers, such as General Motors, Ford, and Chrysler, all of which have asked the Senate Banking Committee to hand a possible cash bail out for each of the companies. This situation is not only happening in the US, European unions are also thinking of giving a €40 billion in soft loans to carmakers. Although Ford has stated that they may be able to scrape by and barely pay all its bills by the end of the year, this is not the situation for both GM and Chrysler, who will definitely need financial aid from the government.

http://www.economist.com/business/displaystory.cfm?story_id=12638642

Government involvement is a major issue in this situation. Although these companies are privately owned, the government can still help them be bailed out of this predicament. A bailout would be a positive effect for the carmakers, allowing them to continue producing automobiles, only at a lower rate, but is negative to its third party- the environment. If the government grants cash for the car companies, the environment will be greatly affected, because of the many more cars out there contributing to pollution; and if the government doesn't grant the money, it will be responsible for thousands of jobless American citizens- GM alone already employs over 266,000 workers around the world. They have to keep in mind however, that GM and Chrysler are not small car companies: if these two companies were to go down, Ford may also plunge in the markets, due to the fact that all three companies get their automobile parts from the same supplier.

This to me, comes as a surprise, because GM, Chrysler, and Ford are some of the largest carmakers around the world, so having them on the verge of bankruptcy is astonishing, even with the recent slumps in the market. When it comes to whether or not the government should give the companies a grant, many factors come into play. In 2007, GM lost $38.7 billion in lost profits and Chrysler $2.92 Billion, so doesn’t this seem like giving to a lost cause? The $25 billion asked by all three companies combined does not even compare to the $38.7 billion debt for GM. Although GM has played a large role in revolutionizing the automotive world, it is time they step down and allow the more popular carmakers of today to take over. The debts of Chrysler and Ford are much lower; therefore, it would be reasonable to bail out Ford and Chrysler, rather than GM