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Caitlin Bennion
Kade Parry
English 1010
04/21/2013
Government Bailouts, Yes or No?
In 2007 the United States entered the worst financial crisis since the Great Depression. The
causes of this meltdown included: the housing market bust, the failure of regulators, the credit rating
agencies and the market itself to rein in the excesses of Wall Street (Elliott) and a worldwide economic
recession. The auto industry also had taken a big financial hit due to the economy and consumers had
stopped buying cars. General Motors corp. (GM) and Chrysler corp. were the hardest hit and faced
bankruptcy.
In December of 2008 GM received $49.5 billion and Chrysler received $10.5 billion from the
federal government (Isidore). The auto industry bailout of GM and Chrysler is and was very
controversial among many groups. It would be hard to discuss them all, so I am going to cover four
viewpoints from both well-known people and political organization stand points. They will include
positions by the Obama Administrations, former presidential nominee Mitt Romney, Ford and the U.S.
Chamber of Commerce.
Chrysler was not new to this financial situation. In 1980 it received a loan guarantee of $1.5
billion from Congress and in 1980 that bill passed. Chrysler had started to have financial struggles in the
1960s for many different reasons. The biggest factors were the rising prices of fuel, high interest rates.
(Seabury). With these reason weighing on them it led them to need its first government loan guarantee.
GM saw its financial hardship coming on years prior to asking for the government bailout. GM
had union contracts that were costing the company more then it could afford. Union members were paid
$70 per hour, on average GM also had way more cars and dealers then needed (Amadeo). These
things hurt the company greatly.

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GM is headquartered in the state of Michigan. It has over 202,000 employees and does business
in over 157 countries. If the government had not bailed out the auto industry, Then we would be buying
Cars from china instead on selling cars to them according to president Obama. Many also feared that if
we didnt bail out GM and Chrysler, too many job would be lost and it would have put our country into
an even deeper financial depression. Mitt Romney disagreed with that statement. He thought the
carmakers should take another route to fix their problems.
Romney was a presidential Candidate in the 2012 election against President Obama, and he did
not favor the auto bailout. His father, George Romney, was the chief executive officer of American
Motors, a major auto manufacture. He took over the company when its president died and at that time it
was on life supportbanks were threatening to deal it a death blow (Romney). With his strong
background in cars and after watching his father save a company, Romney took a very strong stance
against the bailout of GM and Chrysler. He had both long-term and short-term plans to fix their current
situation.
Romney believed that GM and Chrysler should file Chapter 11 bankruptcy without the help of
taxpayers (Stewart). If they filed bankruptcy, the companies could take steps to fix their problems like
renegotiating the union contracts. According to Romneys article Let Detroit Go Bankrupt, he believed
that with the government bailout of GM and Chrysler we were only pushing the problems down the road
and not fixing them. He said in this article on November 18, 2008, If General Motors, Ford and Chrysler
get the bailout that their chief executives asked for yesterday, you can kiss the American automotive
industry goodbye. It wont go overnight, but its demise will be virtually guaranteed. Because we were
only giving them money and not fixing any of their problems that led them to need the bailout in the first
place (Romney). He saw only destruction through a bailout with no fixing of the auto industry.
Romney knew how overpaid some of their employees were. He said their huge disadvantage in
costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and

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benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. He said it was
important for everyone to contribute to the re-building of GM and Chrysler including the unions and
management. He said when his father took over American Motors he cut his pay and that of his
executive team (Romney). This is one of the factors that were hurting GM and Chrysler and in a short
term sense could greatly help the company start to rebuild.
Romneys stance was very different from what GM was asking for with the bailout. He wanted
them to cut costs where needed and come up with a win-win proposition (Romney). Along with
bankruptcy, and instead of a bailout, Romney said the federal government should invest substantially
more in basic researchon new energy sources, fuel-economy technology, materials science and the
likethat will ultimately benefit the automotive industry, along with many others. He didnt want to
just give them money because that wouldnt help their situation in the long run. He wanted to insure their
problems wouldnt return again by making those investments. Romney didnt believe it was wrong to ask
for government help, but he didnt believe the bailout was the correct plan of action.
Romney and President Obama had completely different points of view for the auto industry
bailout, which they made very clear during the 2012 presidential debates. Romney wanted to see GM and
Chrysler go through a bankruptcy while President Obama wanted to give them a bailout the president
argued that because the banks simply didnt have the money at the time to loan money to support a
bankruptcy.
President Obamas decision to bail out the auto industry in 2009 was very unpopular, according
to a Boston Globe article published in October of 2012. But with 1 in every 8 jobs related to the auto
industry in Ohio, President Obama couldnt let them fail (Jan and Bender). Obama defended the bailouts
in his weekly radio address: If we had let this American auto industry collapseif we had let Detroit go
bankruptmore than 1 million Americans would have lost their jobs in the middle of the worst recession

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since the Great Depression (Obama). Because the country was already in such a bad state and no one
else could help, he felt like he needed to step in to assist.
Obama said he didnt just bail out the auto industry but he also made investments to help all of
America to continue buying cars. He explained Every year, $4 billion of your tax dollars go to
subsidizing the oil industry (Obama). He wanted to invest federal dollars in research on new technology
and energy. Obama said Folks will be able to fill up every two weeks instead of every week, saving the
typical family more than $8,000 at the pump over time (Obama). His goal was to keep the auto industry
going to make sure the economy wasnt hurt more. This quote explains that the bailout wasnt only giving
money away and goes against what Romney had stated.
President Obamas decision to bailout the auto industry may not have been a popular one but,
according to him, it worked. He said that because we got the companies to retool and restructure.
Everyone sacrificed. And three years later, the American auto industry is back (Obama). Obama didnt
want jobs to move outside of the United States and he said again later on if he wouldnt have stepped in
and assisted when he did then wed be buying cars from China instead of selling cars to China
(Kavoussi). President Obama felt very strong that companies like GM and Chrysler were too big to fail
and vital to the American economy.
The countrys largest business associationthe U.S. Chamber of Commercetook a neutral
standpoint, according to the Chambers website. This stance was a rather surprising when considering
their status as the primary voice for the American business.
The Chambers primary goal is to protect the interest of the business community as a whole.
Initially, the chamber voiced concerns about the government choosing which companies to bailout and
which to allow to fail. Then, in Oct. of 2008, the Chamber urged Congress to approve the bail out. It
made statements saying Failure to approve this legislation will wreak intolerable hardship on average

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Americans (Associated Press). They invested millions in advertising, encouraged voters to vote and
discouraging voter who vote on both sides of the bailout.
The Chamber wanted to emphasize how important it was to not cut any funding from the
Advanced Technology Vehicles Manufacturing (ATVM). This program provides ways to invest in new
technology so Americans can become less dependent on oil, says executive Vice President of
Government Affairs of the Chamber R. Bruce Josten (Kingkade). The Chamber saw how important it was
for the American auto makers to survive, and said it was programs like ATVM that would help them stay
alive in the long run.
Ford Motor Co. did not request a federal bailout because it had made preparations for the coming
of the recession. Fords Chief Executive told the Associated Press in 2006 they had built up $23.5 billion
dollars worth of credit to invest in new product plans that would get them through the recession without
relying on the government (Johnson and Krisher). This goes against what Romney had stated in his article
previously mentioned.
Ford faced bigger problems when their competitors received their $60 billion bailout. Ford
wanted to set an example and be perceived as a company trying to pull itself up by its own bootstraps
(Johnson and Krisher). So, it somewhat surprisingly didnt oppose the federal aid given to its large
American competitors. It feared that the collapse of GM and Chrysler would put many parts manufactures
out of business, and ford used many of the same suppliers as GM and Chrysler. While for didnt receive a
bail out, it did participate in the federal governments Cash for Clunkers. Cash for Clunkers was
intended to provide economic incentives.
If I had written this paper at the time the bailout was being given, I probably would have been
against it. But in doing the research and getting a full understanding of how many jobs would have been
lost, I remain in the middle. GM is paying back its bailout, and Chrysler has paid back almost all of its
bailout so it seems to have been a good choice made by the government. However, I am not for any one

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company receiving federal help while others are allowed to fail. Bankruptcy is in our systems for a
reason. I fear if we bail out any one company instead of having it go through the same process as all other
failing companies, it may not learn from what got it into a bad financial situation in the first place and its
might repeat the mistakes. I hope this is not the case for GM and Chrysler.

Work Cited
Amadeo, Kimberly. The Auto Industry Bailout. About. About. 12 Oct. 2013. Web. 6 April 2013.
Isidore, Chris. 3 Answers To The Auto Bailout CNN. CNN. 6 Sep. 2012. Web. 4 April 2012
Jan, Tracy and Bender, Bryan. Auto Bailout In 09 Key To Obamas Survival In Ohio The Boston
Globe. The Boston Globe. 30 Oct. 2012 Web. 4 April 2013.
Johnson, Kimberly and Krisher, Tom. Ford Bailout Money Unnecessary, Company says Huffington
Post. Huffington Post. 10 Dec. 2008. Web. 04/06/2013.

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Kavoussi, Bonnie. Mitt Romney, Barack Obama Spar Over Republicans Auto Bailout Stance The
Huffington Post. The Huffington Post. 22 Oct. 2012 Web. 4 April 2013
Kingkade, Tyler. U.S. Chamber Of Commerce Opposes Auto Loan Cuts, Just Like Environmental,
Labor Groups Huffington Post. Huffington Post. 22 Nov. 2011. Web. 24 April 2013.
Kuhnhenn, Jim. Chamber of Commerce Takes Both Sides on Economic Stimulus Rawstory.
Rawstory. 4 Oct. 2012. Web. 6 April 2013.
Obama, Barack. Obamas Weekly Address: Defending the Auto Bailout ABC News. ABC News. 3
March 2012. Web. 4 April, 2013
Romney, Mitt. Let Detroit Go Bankrupt. The New York Times. New York Times. 18 Nov. 2008. Web. 6
April 2013.
Seabury, Chris. Chrysler And The 1979 Bailout Investopedia. Investopedia. 24 April 2009. Web. 4
April 2013.
Vlasic, Bill. Ford Rejects Big Cuts in Dealer Network The New York Times. The New York Times. 18
May. 2009. Web. 6 April 2013

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