The car industry in the United States

Résumé du document

How is it possible that in the country of free exchanges, state interventionism is the only solution left to rescue what was once the USA source of pride ? In the US, Ford, General Motors and Chrysler, all car manufacturers, are called the Big Three. The thing is that General Motors and Chrysler have gone bankrupt.

This predicament is the result of different phenomena : First, the Big Three were weakened by the 2003-2008 oil crisis which led customers to turn away from pick-up trucks and SUVs. Secondly, it is obvious that this crisis occured because of bad managment, bad business practices. Why is that ?

Extraits

[...] They underline the idea that winners and loosers should be choosen by customers rather than by politicians. Other criticism comes from FORD : Ford expresses its concern that it could sufffer from the bailout plan. Last but not least, General Motors has to change its production : the firm must switch from pick-up trucks and SUVs to small fuel-efficient cars with a very law carbon footprint. Conclusion However unexpected it may seem, while GM and Chrysler are elbowing their way through bankrupcy, Wolswagen is actually setting new plants in Tennesse, which offers better financial conditions than Detroit, with a growth of 38% in the US. [...]

[...] We can explain this fenomenon by a geographic reason. GM is located in the Lake Area (Michigan, Ohio, Indiana), where the financial conditions are not favorable at all, because there is an important union tradition. The Big Three had better go to the South, to Asia for example, where the Asian companies are used to producing. We can say that GM is unable to resist a global trend that favours outsourcing at the expense of national production. As a result, the Big Three are suffering a loss of 30% of their sells, whereas Asian companies such as Toyota, Honda and Nissan are not experiencing bankrupcy at all. [...]

[...] This predicament is the result of different phenomena : - First, the Big Three were weakened by the 2003-2008 oil crisis which led customers to turn away from pick-up trucks and SUVs. - Secondly, it is obvious that this crisis occured because of bad managment, bad business practices. Why is that ? Actually, the Big Three suffer from higher wages than their Asian counterparts because pensions and health insurances are much higher. For example, when General Motors produces a car, the firm pays 15OO dollars of health insurances, whereas Asian companies pay 4OO dollars. [...]

[...] What is Chapter 11 : when a business is unable to face debt, it can be allowed to get loans, recapitalization, restructuration, and automatic stay (legislation against the firm is frozen). Chapter 11 is reorganization, as opposed to liquidation. With this federal rescue plan, the Federal government will hold 60% of GM's stocks. Obvioulsy, journalists, economists and CEO's have level criticism at this way of acting. Indeed, to them, it challenges an essentiel element of a healthy free market : natural regulation of a market through competition. [...]