Benefits of Bailing Out the Big 3 - Essay Example

Yes the Billions of Dollars for a Federal Bailout of Chrysler, Ford, and GM makes great sense for Americans. Yet, a number of people disagree entirely; feeling that such a bail out could cause trouble for the American people. Some even say that allowing the government to give so much money to these three companies will cause America to become more like a socialistic country because the government will seize control of these companies and regulate how they will conduct business. This is not true at all. Our country will not become like a socialistic country, just because the government is temporarily helping them out. The bailout is merely a means for enabling these three companies to get back on their feet and continue business as they did previously before experiencing a downward spiral. Sure, these companies will be subject to certain conditions when borrowing federal money; however, it is no different if they were to borrow from a bank. Banks also like to see what the borrowed money will be used for, and in some instances, they like to see an entire plan drafted up before letting the money go. Lenders like to see that the one they are lending to has a purpose for borrowing from them, and the borrower is subject to those terms until the loan is paid off. While numerous individuals put a lot of effort into disputing why helping these three companies with their losses is not a good idea, there are a number of reasons why the bail out of these three companies makes great sense for the American people. First of all, we must look at how long these three companies have been in business, as well as the history behind these companies. Ford has been in business since 1903, when it was first founded by Henry Ford, Sr. The first car manufactured by the ford family, known as the Model T, was ready to deliver to the public in 1925. This company was the first to put the first car on the road, as well as the first to make cars available to the masses. Ford made sure just about anyone could afford to have a car, as they did whatever possible to cater to those of the middle class. Not to mention, Ford is big on human rights and providing jobs to the jobless, and their priority has always been to make sure that everyone working for them receives fair wages, as they were the first to enact a five dollar a day policy. Ford has been proven to make a large impact on America, even today. Ford has always done business in this fashion since their very beginning, as they have always been all about the people (NPR), (Ford Motor Company). Then, there is General Motors, a company that has been around almost just as long as Ford. General Motors is the manufacturer of some of the most popular cars, such as the Cadillac, the Pontiac, and the Hummer, a car that a lot of people try to get their hands on to drive in ultimate luxury ("Merchandise," General Motors). General Motors was founded in 1908 by William C. Durant, and has now become the world's largest manufacturer of cars. Though General Motors has had a rocky history-the company sinking into debt after doing well for two years, Durant resigning from his company in 1920 to later file for personal bankruptcy, a violent sit-down strike in Flint Michigan by hourly workers in the year 1937, another strike occurring for one hundred and thirteen days between 1945 and 1946, being convicted of conspiracy in 1949, losing more than $750,000,000 in 1980 due to the drop in sales on cars and trucks, and another strike that occurred in 1998 that almost shut down all of General Motor's production in North America-they have accomplished a great deal. Some of the accomplishments of General Motors was that a Cadillac was made with the first electric self starter in history, General Motors accounted for twelve percent of the car market in the United States, they expanded to working overseas, first starting in Britain and Germany between 1925 to 1929, their market shares rose to 41% in 1941, were the first to manufacture cars with air conditioning,, and they have gone as far as to selling cars in Japan, and General Motors produces some of the best cars in the world. Best of all, these cars are American made (Las Angela's Times). Finally, we have Chrysler, which is slightly younger than the other two companies, as it was founded in 1925. Unlike general Motors and Ford, this company's history is quite tumultuous, as the company's success has been fluctuating for the last three decades. For instance, the company ran into deep trouble in the late 70's and it sought assistance from the government so doors could remain open, and the company could stay in business. Chrysler paid off the government loans in the 80's, as they made a major come back, when they sold a plethora of minivans and fuel efficient family sized cars, also known as the K-Cars. In 1987, however, Chrysler experienced another downfall, when it consolidated with American Motors, and the company had to be restructured. Chrysler again made its comeback in the 1990's, when Jeeps and the Dodge Viper Sport's Cars gained notoriety. Then, as a result of the recession, sales fell again. Now, Chrysler is seeking help from the Obama administration, and they are going before a bankruptcy court to find out what the future holds for them (Maynard). We can see that all of these companies have quite a history on our American soil. They have contributed a great deal to the United States economy. Not to mention, millions of people depend on these companies for their job security; these companies are their livelihoods. Why wouldn't anyone want to bail these companies out What does the opposing side find wrong with such procedures One fear that the opposing side has concerning the bailout is that the money is going to be wasted, as the companies have just proven to be losers. One source from the opposing side states that two out of the three companies, General Motors and Chrysler, that are being bailed out are in serious trouble because most Americans have no interest in their cars due to inflated prices, as a result of the companies paying their employees too high of wages. Costs are not competitive enough, and the bailout is only going to postpone the eventual downfall of these companies, making the stay of American jobs temporary (McKenzie). However, this is not the case. A CNET article tells us that in order for the companies to receive help from the government, there are rules and regulations that the companies must follow before they can receive any of the bailout money. These companies cannot spend the money that they receive in any way they see fit. They must manage it properly. This means that they cannot pay employees and other workers unreasonably high wages. The wages that workers receive must be reasonable. Furthermore, the companies are required to cut spending in places that are unnecessary. For instance, the Obama administration required that General Motors got rid of their current CEO before any money would be given to the company to help with their debts. This is due to the mismanagement on the part of that current CEO, who got the company into financial trouble in the first place. General Motors complied, submitting a statement showing that it was actually done (LaMonica). This takes care of the fear that the companies are receiving bailout money as a reward of mismanagement, as they were not allowed to continue in the way in which they were going and had to change their course to receive help. General Motors was also required to write up a restructuring plan, which consisted of restructuring in four areas, namely plans to sustain profit, a balance sheet that is much healthier than previous ones, technology leadership, and restructuring of the operations. Chrysler is expected to do similar things in order to obtain the money that they need. Such restructuring is to insure that the companies will continue to stay in business, which takes care of the fear that the stay of American jobs is only going to be temporary. In addition to the restructurering that these companies need to do in order to get the money, they are also required to produce cars that are more fuel efficient, which will save millions of dollars on the part of consumers (LaMonica). If consumers know that they are purchasing cars that will save them millions of dollars, this will cause more people to be interested in purchasing said cars, which takes care of the fear that the American people will not be interested in purchasing the cars. Once people do become interested in purchasing the cars, companies can then become creative in how they will compete, such as by adding neat features to their cars, and this will allow prices to become competitive. For example, one company might cell a car that saves on fuel, has built in GPS, cruise control, heated seats, a TV and DVD player, electronic adjustable mirrors, sensors that enable the driver to know if he is backing up too close to another car or object, and leather interior. Another company can manufacturer a car with similar features; however, this company can add a little bit more, which will enable them to increase the price a bit. Or they could have a sale that the first company would not. These companies can, no doubt, be creative with their competitiveness, once they get back on their feet. Then, there is the fear that taxes will be raised to the point of severely burdening the citizens, as a result of this bailout. People who are on the opposing side of the bailout fear that the taxes will be so high that it will basically seem as though they are being punished for working. But according to the article titled, "Geithner sees economy slowly rebounding; says deficits an issue to deal with later," states that if a person makes $250,000 or less for the year, then that one will not be effected by high taxes (Associated Press). This should make the opposing side feel much better about the bailout, as far as the tax issues are concerned. But what these opposers really need to understand is that if these three companies are not bailed out, there are going to be some very serious consequences that could affect our country quite severely. One consequence that would occur, should the bailout not take place is that the bankruptcy of General Motors will have a grave impact on America as a whole. Not to mention, if these three major companies go bankrupt, millions of Americans will lose their jobs, which can cause our economy to plummet. But if the bailout is instituted, American jobs will remain safe. The economy will become stabilized, and then, there will be a chance for economic growth (Walsh). Ford is already proof that this bailout plan works because they are now leading in the automobile industry once again. An article titled, "Ford wins the Most Excellent Automotive Awards in History from Popular Mechanics," states that the "Ford vehicles winning this year's awards are the 2010 Ford Mustang Shelby GT500 in the Performance category, 2010 Ford Transit Connect in the Workhorse category and the 2010 Ford F-150 SVT Raptor in the Off-Road Ability category" (Ford Motor Company). This is a complete turnaround from their previously troubled state. The article further states that Ford makes sure their cars are fuel efficient, so their customers will not be affected so badly by the fluctuating gas prices. Not to mention, the cars drive smoothly and with great speed, and they are built in a compact fashion; yet, they are able to perform big (Ford Motor Company). None of this could ever be done if Ford Motor Company were still in financial danger. Another thing that is remarkable about the growth of Ford Motor Company is that they have earned $1,000,000,000 in the third quarter of this year. Three factors were responsible for these spectacular earnings. For instance, the company cut costs in order to conserve money. They evaluated their spending, and they put their money where it was most important. Then, they gained on their market shares. Last but not least, Ford Motor Company instituted a Cash for Clunkers program, which attracted thousands of buyers (Durbin, Krisher). Another consequence that will occur if these three companies are not bailed out is that a number of retirees will lose their pensions that they worked for all of their lives. Should these three automobile companies go bankrupt, then all retirement plans will dissolve. The bailout, on the other hand, will keep many retirees from facing such a terrible fate, and the retirees will be able to continue receiving their pension (LaMonica). Aside from the consequences that America will be saved from if the bailout should continue, there are some wonderful benefits to the bailout. One wonderful benefit of the bailout is that America will be able to be the world's leader in manufacturing clean cars. Pollution levels will drop, and consumers will be able to save money on fuel (LaMonica). Numerous individuals will welcome this change, which will enable the sales for automobiles to skyrocket. Consumers will be more motivated to purchase cars if they know that they are not going to burn gas quickly and drain their wallets in a hurry. People love to know how they can save money, and if they hear about cars that will enable them to do that, they will have no problems making the purchase. Another of the benefits to the bailout is that there will be more jobs that can be created for the American people, which will bolster our economy. More jobs will be kept on our soil, and less of our work will be outsourced overseas. Our country will also be able to get out of debt much quicker, since more American people will be working, who can contribute to paying into our society. We can bolster our economy even further if we should export our cars to other countries. Ford is already doing this now, as they have struck up a contract in Canada with the Canadian Auto Workers union that will guarantee two new cars in the near future (Associated Press). With Ford selling cars in both the United States and Canada, we should see a dramatic increase in our economy in the future. The same goes for General Motors. This company is the world's largest manufacturer of cars, operating in various countries around the world besides the US Sources already state that since the beginning of the bailout, the economy has already started to rebound. An article titled, "Geithner sees economy slowly rebounding; says deficits an issue to deal with later," states that as a result of the bailout, the banking system has become much more stable. The bailout has enabled private capital to flow back into the system, which results in big business being able to borrow money again. In addition to these wonderful improvements, small businesses will be able to look forward to having credit extended to them, so they will be able to expand their operations (Associated Press). Now that all the fears, concerns, and the arguments of the bailout have been addressed, and now that we know about all of the benefits, it is not difficult at all to see that this is a solution that makes since for America as a whole. Once these companies get back on their feet, a number of spectacular things will happen. More Americans will get jobs, which will enable the unemployment rate to drop. As a result of being able to supply more citizens with more jobs, we will have a drop in the number of houses that are foreclosed on. People will be able to put more back into the economy by spending more because if they are making more, they will not feel such a need to hold onto their money so much, as they do now. Our banking system will improve drastically, and people will be able to invest again, and they will actually earn from their investments. Better cars than ever before will be sold to our citizens that will not only drive smoother but will help them save money on fuel, which will allow them to feel that they are free to move about the country without their wallets being totally destroyed. And best of all, we can import our goods to other countries to be sold elsewhere, which will also help us to get out of debt. We, as the people will be able to receive some relief. It won't happen overnight, but it will happen in time, and this bailout is the first step. The bailout for America's three greatest auto manufacturers is only the beginning of a bigger and brighter tomorrow. Work Cited Associated Press. "Canadian Auto Workers union reaches deal with Ford." Chicagotribune.com. Chicago Tribune, 30 Oct. 2009. Web. 3 Nov. 2009. Associated Press. "Geithner sees economy slowly rebounding; says deficits an issue to deal with later." Chicagotribune.com. Chicago Tribune, 1 Nov. 2009. Web. 3 Nov. 2009. Durbin, Dee-Ann, and Tom Crisher. "Ford Surprises with Earnings of Nearly $1B in 3rd Qtr." Chicago Tribune 26 Oct. 2009: n. pag. Chicago Tribune. Web. 3 Nov. 2009. Ford Motor Company. "Ford Motor Company Heritage." Ford Motor Company. N.p., 2009. Web. 3 Nov. 2009. Ford Motor Company. "Ford Wins the Most Automotive Excellence Awards from popular Mechanics." Prnewswire.com. Popular Mechanics Magazine, 28 Oct. 2009. Web. 3 Nov. 2009. General Motors. "Merchandise." General Motors. N.p., 2009. Web. 3 Nov. 2009. LaMonica, Mark. "Auto Bailout." Green Tech. CNET News, 30 Mar. 2009. Web. 3 Nov. 2009. Las Angeles Times. "A Timeline of Ford Motor Company." Npr.org. NPR, 2009. Web. 3 Nov. 2009. Maynard, Micheline. "A Short History of Chrysler." New York Times. N.p., 31 Apr. 2009. Web. 3 Nov. 2009. McKenzie, Richard B. "Bailout Honda, Toyota, and Mercedes, Not GM, Ford, and Chrysler." web.gsm.uci.edu. N.p., 2008. Web. 3 Nov. 2009. Walsh, Deirdre. "Big Three bailout drives debate in lame-duck Congress." CNN. N.p., n.d. Web. 3 Nov. 2009. Read More