George Brown College
School of Business

Bailout or Bust? Case Study

Noelle Nurse
Tran
Monica Molina
BUS 1038
Professor Joyce Manu
April 5, 2013

A perfect combination of unfavourable factors contributed to a major automobile manufacturing industry crisis in North America in 2009. The auto manufacturing industry had taken such a dramatic turn from being large and successful to becoming an industry full of debt and bad reputation; especially for three big and important companies: General Motors, Ford Motor and Chrysler. The “big three”, as they call it, had faced a major turndown leaving thousands and thousands of employees without jobs as a result of a series of bad long term “strategic “decisions. To aid these large industries, the government offered to help, by bailing them out with billions of dollars. This was a very risky decision from the government because of the size of the bailout; hence they needed to keep an open eye on these companies to make sure that this large amount of money was being used wisely. One of the ways the government was taking cautions was by examining the actions being taken by Japanese companies (Toyota Motor, Honda Motor and Nissan Motor) facing the same situation without requiring any government bailout. Their response had been the implementation of a more intelligent strategy, for example, Honda Motor reacted by closing down its plants for 13 days to reduce the production of even more cars they were aware they could not sell. Furthermore, Toyota reduced its production cuts and decreased their executive’s salaries. This and many more strategies led the “big three” to take into consideration some of the ideas of their Japanese fellows, for instance, to move some of their operations abroad to save costs. However, it was not an easy plan since the plants in North America are Unionized. As a response, the Unions were not