Finance discussion 2: reply to 2 students discussion posts individually 200-300 word

Student #1 post: n 2008 on the heels of the financial institutions bailout the US government also bailed out the Big Three car companies in the US, GM, FCA and Ford. In the end the US government spent 80.7 billion dollars from December 2008 until December 2014. There is rumors and speculations and evidence that the banks are at fault for this and I actually I agree with this theory and assessment because they messed the consumers money and if consumers are upside down on their mortgage and cant have a stable home they are not going to be investing into new cars so these American car industry took a hit. Each of the Big Three took a hit and the helped the received was different but ten years down the road the question is still raised is government bailouts a good idea and do they actually work? I have yet to reach in opinion but the research that I have found suggest that it indeed was a good idea. Two Companies received TARP funds and one received money from the Energy Department. General Motors: Charles Wilson once said that “For years I thought what was good for out county was good for General Motors and vice versa” and by late 2008 – 2009 this was no longer the case . When sales begin to take a nose dive and gas prices begin to soar in 2005 the company was in trouble. The initial bailout of 18.4 billion was not enough and in summer of 2009 they filed for banckrupcy. The government then lent GM over thirty billon dollars to assist with the bankruptcy reorganization. This was given to help cover some of the benefits for those who had retired. BY 2012 they pledged to repay the 30-million-dollar loan, it agreed to pay union health benefits and it promised to sell some of the lines such as Saab, Saturn and Hummer, reduced the number of models for sale to 40. It shut down 11 of its factories and cut more the 20.000 jobs. Chrysler Bailout: In spring 2009 Chrysler filed for bankruptcy and the US government to lend them 6 billion to assist operation while in banckrupcy. They merged with their Italian counterpart Fiat and they closed their “not doing so great” dealerships as part of their bankruptcy. They pledged to debut an electric vehicle in 2010 and to up production by 2013. Ford: They did not receive funds from TARP but they did request a 9 billion line of credit from the government and for this loan they pledged to spend 14 million dollars in new technologies. With the loan they receive from the Energy Department’s Advanced Technology Vehicles Manufacturing program they wanted to develop hybrid and battery powered vehicles. To assist with this they upgraded their factories state side to produce these eco-friendly cars. Their need for the bailout money was to just sustain them unlike their counterparts. Overall based on the numbers I have seen the bailout form a money standpoint was bad but on an economic standpoint it was good for the American people. The bailout helped the economy stay afloat by not only providing jobs but allowing them to stay competitive against Japanese and Germany automakers who do have factories in the US. Having competition, I believe is healthy because I don’t think having a monopoly is good for any economy and encourages innovation. If this were to happen again, I am not sure I would be okay with bailing them out again. If big companies and government are intertwined I think it would be bad for business but also bad for the American people as a whole. Student#2: The 2008 subprime mortgage crisis caused vehicle sales to decline dramatically. The U.S. Big Three GM, Ford and Chrysler were also weakened by the substantially more expensive automobile fuels linked to the 2003-2008 oil crisis which, in particular, caused customers to turn away from large vehicles. GM Motors GM Motors were known for producing the most competitive cars and trucks in the industry. GM's perfect record took a turn when troubles hit just as the company seemed to be making progress on a number of things. On the cost side, the market slowdown caused many of its factories to close down. The problems on Wall Street made GM take several hits as well. The company couldn’t borrow money to ride out the storm, and the credit squeeze made car sales decline dramatically, the auto industry lives on credit as do its customers, so when access to car loans or leases became limited, sales fall off a cliff. Ford Motors In 2008 Ford took a $14.6 billion loss, the work worst annual result in its 105-year history. It was a year in which Ford’s revenue declined almost 20 percent, and its cash reserves declined by $21 billion. Alarmed by the cost of a tank of petrol, consumers were seeking more fuel-efficient cars. Being that Ford was known for the traditional specialty of pickup trucks and sports utility vehicles left it particularly badly exposed. Ford’s cutbacks led to job losses and a reduced workforce, which caused the number of vehicles rolling off the company's production lines to decline. The entire motor industry was feeling the pinch. FCA In its 85th year in business, Chrysler faces a precarious future. As consumer support waned and resources dried up, the once mighty automaker was forced to ask for bailout money, seek out new alliances, and negotiate labor concessions. In early 2007, Chrysler announced it was cutting 13,000 jobs, including 2,000 in Canada, after reporting a net loss of $1.5 billion in the previous year. Chrysler announced plans to close 30 manufacturing plants for a month. The automaker says with scarce financing options, consumers were shying away from all showrooms. In 2008 Chrysler sign a "non-binding" agreement with Fiat, which will see the Italian company get an initial 35 per- cent stake in the U.S. automaker. Chrysler filed for bankruptcy after failing to secure a debt-reduction agreement with creditors. Outcome of Ford, GM, and FCA Ford Credit received its bailout from the Term Asset Backed Securities Loan Facility, not TARP. That was a government program for auto, student, and other consumer loans. The federal government took over GM and Chrysler in March 2009. It fired GM CEO Rick Wagoner and required Chrysler to merge with Italy's Fiat S.p.A. Chrysler entered bankruptcy on April 3, 2009. GM followed on June 1. By the end of July, they emerged from bankruptcy reorganization. GM became two separate companies and spun off GMAC into Allied Financial. Chrysler became a brand owned mostly by Fiat. The Treasury Department began selling off its ownership of GM in 2010. Chrysler paid off the last of its loans by 2011 (Amadeo, 2019).