The automotive industry in the United States began in the 1890s and rapidly evolved into the largest in the world as a result of the size of the domestic market and the use of mass-production. The United States was overtaken as the largest automobile producer by Japan in the 1980s and subsequently by China in 2008, and after shares with Japan of second-third place last years now is second among largest manufacturer in the world by volume with 8-10 million automobiles annual manufacturing (except down to 5,7 million in 2009 due to crisis), although peaks of production levels of up to near 15 and 13 million units were achieved in the 1970s and 2000s.[1][2][3]
The motor vehicle industry began with hundreds of manufacturers, but by the end of the 1920s it was dominated by three large companies - General Motors, Ford and Chrysler. After the Great Depression and World War II, these companies continued to prosper and the US produced near three quarters of all automobiles in the World near 1950 (8,005,859 of 10,577,426).[2][3] However, beginning in the 1970s, a combination of high oil prices, increased competition from foreign auto manufacturers severely affected the companies. In the ensuing years, the companies periodically bounced back, but by 2008 the industry was in turmoil at crisis. As a result General Motors and Chrysler filed bankruptcy reorganization and were bailed out with loans and investments from the federal government.
Prior to the 1980s, most of the plants were owned by domestic manufacturers of the Big Three (GM, Ford, Chrysler) and AMC. However that has dropped steadily since with auto transplants, factories established in the US by foreign-owned car companies.
The CEOs of the Big Three requested government aid in November 2008, but sentiment in Congress was against the automakers, especially after it was revealed that they had flown to Washington D.C. on their private corporate jets. In December 2008, President Bush gave $17.4 billion to GM and Chrysler from the Troubled Asset Relief Program program as temporary relief for their cashflow problems. Several months later, President Obama formed the Presidential Task Force on the Auto Industry to decide how to handle GM and Chrysler. Chrysler received a total of $12.5 billion in TARP funds and entered Chapter 11 bankruptcy in April 2009. Automaker Fiat was given management control and a 20% ownership stake (adjusted to 35% under certain conditions), the U.S. and Canadian governments were given a 10% holding, and the remaining ownership was given to a Voluntary Employee Beneficiary Association (VEBA), which was a trust fund established to administer employee health care benefits. The Automotive Task Force requested that GM CEO Rick Wagoner resign (although he was replaced by another long-time GM executive, Frederick Henderson). GM received a total of $49.5 billion in TARP finds and entered Chapter 11 bankruptcy in June 2009. The U.S. and Canadian governments received a 72.5% ownership stake, a VEBA received 17.5%, and the unsecured creditors received 10%. As part of the bailout GM and Chrysler closed numerous production plants, and eliminated hundreds of dealerships and thousands of jobs. They also required a number of major labor union concessions. GM also sold off the Saab division and eliminated the Pontiac, Hummer, and Saturn Corporation brands. In addition to the $62 billion that the automakers received from TARP, their financing arms, GMAC and Chrysler Financial received an additional $17.8 billion.[20] In addition to the funding from the United States government, the Canadian government provided $10.8 billion to GM and $2.9 billion to Chrysler as incentives to maintain production facilities in Canada.[21]
Ford did not request any government assistance, but as part of their downsizing sold Volvo in 2010 and phased out their Mercury division in 2011. (They had previously sold Aston Martin in 2007, and Land Rover and Jaguar Cars in 2008). Under the Advanced Technology Vehicles Manufacturing Loan Program Ford borrowed $5.9 billion to help their vehicles meet higher mileage requirements.
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The Auto Industry Bailouts: Obama, Financial Crisis and Car Sales in the United States (2010-2012) | |
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