One Economics asepct of the auto industry - Essay Example

The Auto Industry: The auto-industry in United s experienced a series of boom and bust, during the period of the 20th century. This industry has played an important role in the development of the American economy. Economic analysts used to examine the increase in the number of cars that were sold annually as one of the indicators of a positive economic health of a country. Because of this significant role that the auto-industry has played in United States, one of the major economic issues that I had an interest in, is on how the American government played a role in bailing out its companies, during the economic recession of the 2007/ 2008 crisis. It is important to explain that the 2007/2008 economic crisis had a very negative effect on the American auto industry, with almost all American auto companies becoming on the verge of bankruptcy.
Companies such as Chrysler and General Motors were on the verge of bankruptcy, and this forced the American government to intervene and bailout these companies. This is by using the funds emanating from TARP, which is an acronym for the Troubled Asset Relief Program. A company such as Ford Motors was able to protect itself from the effects of the financial crisis, mainly because it was maintaining a hedge fund, whose money could be used for purposes of protecting the organization, during a period in which it was facing some financial crisis. There is a lesson to be learnt from this study. The lesson is that, it is always necessary for companies or business organizations to maintain an hedge fund, that could be used to fund the operations of a company or a business organization during periods of recession.
This should not only be applicable to the auto-industry, but to other industries as well, such as the finance, communication, transportation industries, etc. Furthermore, this information is also significant to me, mainly because the auto industry has managed to improve from a near bankruptcy situation in 2007/2008, to one of the most profitable industries in the United States. This is because all these companies that were bailed out have managed to repay their debts, totaling to billions of dollars. It is quite interesting to know what type of strategy that these business organizations were able to use, despite the strong competition that emanated from the other companies, specifically from Japanese auto companies. My interest in this issue also emanates from the desire to know more about the 2007/2008 global crisis.
In my knowledge, the crisis emanated because of the inability of the financial sector to regulate the housing mortgage market. However, this crisis had an impact on the entire economy of most European and American countries. This is an indication that the global economy is highly dependent on one another, and this is because of the liberalization of the world economy, and the tools of globalization such as the internet, the development of a transportation infrastructure that makes it easy to travel from one region to another.
In conclusion, the American auto industry is one of their most important economic industries. This is the reason the American government had to bailout companies such as General Motors and Chrysler, to protect them from going bankrupt. However, after the economic recession, these companies have managed to improve on their economic performance, positing profits, and paying back their debts. Read More