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Bailout for American auto industry

Introduction

The impact of financial crisis that began in the U.S. has come to the auto industry in that country. In response, the government granted a few days ago an aid package of 17 thousand 400 million dollars which aims to prevent the bankruptcy of two of the major auto manufacturers $ 13.4 billion for General Motors and $ 4 billion for Chrysler. Finally, the government decided that the bailout of the carmakers is preferable to bankruptcy. Undoubtedly, the failure of these companies would extend far beyond the automotive industry due to the overall characteristics of the sector, would also have negative effects on employment, and remember that the level of U.S. unemployment is already above 6%. A bankruptcy could aggravate and prolong the figure most severe recession in the economy (Anginer & Warburton, pp. 121-130). 

Discussion

Economist View

On the other hand, economists like Gary Becker, Nobel Laureate in Economics, suggests that bankruptcy is preferable to the rescue, as it would allow GM and Chrysler back to be more competitive by eliminating certain obligations in its labor contracts and pay reasonable salaries to their employees . 

Of course, there is a risk that these resources will only prolong the crisis in the automotive industry, for the fall in car sales in the U.S. is worrisome, for example in September and October 2008, the U.S. auto industry reported at its worst annual drop in sales in many years, including: GM drops 16%, Ford 34% and Chrysler 33%. This is one of the main reasons for the shutdowns in plants sector. The scenario is also bleak for our country, since in recent years Mexico's vehicle exports have been mainly target the U.S. market. Challenges to Car makers

The challenges of the American carmakers are to implement methods that allow them to compete in the market. A key would be to reduce operating costs, since the differences in hourly labor costs in the U.S. are very significant; for example, the average cost per hour worked at Chrysler is $ 75.86 dls, General Motors of $ 73.26, while its competitors Asians like Toyota and Honda are 47.60 and 42.95 dls respectively. On the other hand the price of the shares of the companies involved in the rescue have been dropped very important, such as shares of General Motors, in the year lost about 90% of its value. In the early days of this year are listed in less than five dollars. 

The aid package is an incentive that provides an opportunity for OEMs to restructure outside of bankruptcy, also have little time to do, if companies do not present a viable plan to make them more competitive in the long run for 31 March will have to return the resources (Guthrie & Slocum, pp. 283-292).

Financial Crisis

After financial markets, the crisis has now spread throughout the economy. Governments are therefore under increasing pressure to help the industrial sectors particularly affected by the crisis. This is a sensitive issue for the internal market. Many economists, while in the present circumstances justifying the government interventions in the ...