...Running head: AUTOMOTIVE BAILOUT The Automotive Industry Bailout: Rewriting History ECON 625: Managerial Economics Abstract The automobile has long been a symbol of American growth and prosperity. Throughout the 20th Century owning and driving a car was an essential part of everyday life for vast majority of U.S. citizens, but few took much time to think about how they were manufactured. Early in the 21st Century, as the U.S. economy began to trend downward, it became apparent that two of the three primary automakers were in significant financial peril. With government aid already being allocated to some of the nation’s largest financial institutions, difficult decisions had to made as to how to approach the alarming crisis at the heart of an industry woven throughout the lives of so many United States citizens. Introduction Beginning in the early twentieth century, automobile makers began marketing and ultimately selling cars to middle-class Americans. It did not take long for a deep love affair for cars to develop across the nation, and ownership became woven into the fabric of the “American Dream”. The invention of the assembly line in the 1910s made automobiles relatively inexpensive, and by 1929 it is estimated that American car companies were producing 5.3 million cars per year (Miller-Wilson, n.d.). The automotive industry surely had its share of ups and downs during the 1900’s, with two World Wars, the Great Depression, an oil crisis in the 1970’s,...
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...ten years, America has had many historic moments. With planes flying into the World Trade Center to the election of our first African-American president, the American public has had much to be excited about and to fear. In more recent history, the American economy has been the main topic. From the Fall of Wall Street, crashing of the housing market, to the fall of the American Automakers. The government has stepped in to save the private market and attempt to restore life to what was once a corner stone in America. Chrysler was one of many companies to be bailed out by the government during 2008. This is a look at where Chrysler started to where they are today. The Chrysler name doesn’t mean much to residents of Kenosha. The auto plant has been called by many names since 1900, when Thomas Jeffery bought a bicycle factory and started mass-producing vehicles. These vehicles had two groundbreaking innovations: steering wheels and front-mounted engines. Historians say it was in Kenosha, not Detroit that cars began “to look like cars.” Vehicles jokingly referred to as Kenosha Cadillacs, were small, inexpensive, and sometimes, homely looking Ramblers. (Nichols, 2009) The company originally started out as the Thomas B. Jeffery Company, then as Nash Motors, next as the Nash-Kelvinator Company, and then the American Motors Company (AMC). AMC partnered with the French firm Renault in the 1970s. They sold out to Chrysler in 1987. (Nichols, 2009) In 1987...
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...continued to invest in mortgage securities but the financial institutions did not maintain enough reserves in case the housing market crashed. Naturally, the housing market came crashing down leaving borrowers “upside down” in their loans & they were forced to foreclose. When this happened, the banks became unwilling to lend money so funds were not available for businesses. Without funds for everyday operations, businesses struggled causing layoffs & raising the unemployment rate. 2. What steps did the Federal government and the Federal Reserve take to mitigate the crisis? The Federal Reserve bailed out Bear Stearns & AIG. The U.S. Department of the Treasury seized Fannie Mae & Freddie Mac. Congress passes the economic bailout plan TARP which spent $700 billion investing in banks & bailing out the auto industry. Congress also passed an $825 billion economic stimulus package called the American Recovery & Reinvestment Act which included cutting taxes, building infrastructure, & investing in green energy. 3. Compare and contrast microeconomics and macroeconomics. How do the two approaches interrelate? Microeconomics is...
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... Lisa Kincaid Research and Communication- RES 531 April 18th, 2010 Context of the Problem Today the economy is at its worst than it’s ever been before since the 1940s. Unemployment is at a record high as well as companies that are continuing to close down due to financial issues. The housing markets, auto industry, banking industry, & loss of jobs are all major things that are being affected by the way the US is spending money. The housing market and banking industry are both some of the main things that are having a major affect on the U.S. and to how this affects all other aspects of daily living. Some people may ask, “How did we get this way”? Over the past 180 years the United States grew to a huge, integrated, industrialized economy that makes up over a quarter of the world economy. The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), an entrepreneurial spirit, a commitment to investing in material and human capital, and at times a willingness to exploit labor. In addition, the U.S. was able to utilize these resources due to a unique set of institutions designed to encourage utilization and extraction. The economy has maintained high wages, attracting immigrants by the millions from all over the world. In the 19th century, recessions frequently coincided with financial crises. Because of the great changes in...
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...THE AUTO INDUSTRY The automobile industry played a critical role in the current USA recession. In recent years, the auto industry has made a rapid growth, propelled by the governmental bailout and technological innovation stemming from international competition. Businesses The acquisitions in the auto production were part of a series of consolidation in the global automobile industry (BEA). The American car industry introduced many new vehicles that have attracted consumers as they pay attention to fuel efficiencies, and environmental soundness. There is a stronger than ever need for cars in the automobile industry as new and efficient models are being manufactured. This has driven a fierce competition between auto-makers with price a major factor. The industry sold over 15 million in 2013 which was 1 million higher than that of 2012. The forecast for 2014 is even higher as a result of many factors, one of them a renewed economy as well a constant high demand. The average age of vehicles on the road is 11 years and consumers want and need to upgrade to higher mileage, safer, higher-tech vehicles with the latest electronic gadgets and personal comforts. An example is General Motors who is abreast of the competition with many redesigned vehicles expected for 2014. Small cars, as well, will stay competitive as it serves as a point of entry into this business by younger people purchasing their first vehicle with maybe student loans and concerns about the cost of gasoline...
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...Feb 20, 2013 Author Note Bing Bai, Department of Business, St. Thomas University This research was supported in part by a grant from the BUS 673 management writing & reporting class. Correspondence concerning this article should be addressed to Bing Bai, Department of Business, St. Thomas University, 16401 NW 37th Avenue, Miami Gardens, FL 33054 Contact: b0771276@stu.edu Introduction 2009, by the impact of the economic downturn in North America, the auto market is also showing a downward trend, the U.S. auto market, sales reached bottom in recent years, a decline of more than 20%. With the slow recovery of the economy in North America, as well as various stimulus policies play a role, so that the downward trend in remission. In 2010, total sales of U.S. automotive (car, SUV, MPV, pickup truck) reached 11,590,274, an increase of 11% year-on-year, U.S. vehicle sales remained year-on-year growth of 11% in January-July 2011. Undergo the shrinking of automobile market, although the United States rely on to curb the momentum of a sharp decline in the automotive market policy factors to a certain extent, the government "TM" subsidies just one pin short-term cardiac and unable to drive the stable recovery of the automotive market. The decline of the Big Three, but also to the global automotive industry, the research and development of new automotive technologies put on the agenda, energy-saving...
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...Ford Motor Company and Change Management Founded in Detroit, Michigan in 1903 by Henry Ford and a group of investors, the company introduced the tremendously successful Model T in 1908 and by 1923 was producing more than half of all U.S. automotive vehicles. Through the Lincoln Motor Company, Ford produced luxury Lincolns and Continentals. After years of declining sales, the Model T was succeeded by the Model A in 1927 other companies such as General Motors took the opportunity to make an advance into Ford's dominance. The company was reincorporated in 1919, with Ford and his family acquiring full ownership Henry's son Edsel served as president 1919-1943 and Henry's grandson Henry Ford II led the company 1945–1979, reviving its fortunes considerably. Its stock was first publicly traded in 1956. Ford acquired the British automaker Jaguar in 1989 -1990, bought the rental car company Hertz Corp. in 1994, and purchased the automobile division of Volvo in 1999. Later acquisitions included Aston Martin and the Land Rover brand of sport utility vehicles. Ford also owns a significant share of the Mazda Motor Corporation because of financial struggles at the beginning of the 21st century, the company sold off Aston Martin in 2007 and both Jaguar and Land Rover in 2008. Faced with an overwhelmingly complex situation, Alan Mulally was brought in as Ford Motor Company's new president and CEO. As diverse global dynamics confront the company and pressures continue to build, he has...
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...US Financial Crisis US Financial Crisis This paper aims to describe the US Financial Crisis in terms of causes, impact, and remedial actions taken by the public and private sectors. It presents the thesis that the financial crisis is also a crisis of values that prompts a reevaluation of the premises of American capitalism. In particular, that prosperity is the foundation of peace and order. A review of literature provides the basis for a short commentary on the subject. Preliminary review of literature on the subject brings to fore some distinct patterns in consumer and investors behavior that make them peculiarly venerable. First is the tendency of investors to join the bandwagon of speculative investment and of putting their money where others put theirs. Second is an apparent lack of understanding on the relationship between risk and returns. Third is an apparent lack of appreciation for the principles of supply and demand. The principle states that excessive supply will reduce the price and demand for a product to the advantage of the buyer, while a lack of supply will increase demand and price of a product to the advantage of the seller. Causes Economists stress the importance of tracing the root causes of the financial crisis in order to provide a systemic solution to the present financial crisis. Most references present the cause of the financial crisis to be the “subprime mortgages.” However, subprime mortgages by itself did not cause the housing bubble...
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...through the bailout of the auto industry, institution of the cap-and-trade system, various stimulus and bailout programs, and a takeover of the healthcare sector. (Bedey) Although these topics are still relevant, recently the motion to repeal “Don’t Ask Don’t Tell” has become one of the most talked about subjects. Before we get into debate, one must know the basic principles of the policy and its history of origin. “Don’t Ask, Don’t Tell, Don’t Pursue, Don’t Harass” (DADTDPDH or DADT for short) is a ban on lesbians, gays and bisexuals serving in the military. DADT is the only law in the United States that authorizes the firing of an American for being gay. There is no other federal, state, or local law like it. DADT is the only law that punishes lesbians, gays and bisexuals for coming out. Many Americans view DADT as a simple agreement with discretion as the key to job security. While this is true to some extent, in the eyes of a homosexual service member, it may not be so simple. An honest statement of one’s sexual orientation to anyone, anywhere, at anytime will lead to being fired. (Service Members Legal Defense Network) DADT was the result of a failed effort by President Clinton to end the ban on gays in the military. The bill was a result of the brutal 1992 murder of Seaman Allen Shindler. Bill Clinton, a candidate at the time, proposed ending the ban by issuing an Executive Order overriding the Department of Defense regulations that barred gays from serving. Congress, however...
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...are in high demand. 2. What role does entrepreneurship play in the economy? Who stands to gain from the success of individual entrepreneurs? How do other parties benefit? It inspires new business ventures that support wealth building and future prosperity; A lot people who are unemployed will find jobs that are more flexible and challenging, working for big and small businesses. 3. When did American business begin to concentrate on customer needs? Why? World War II; The reason was more intense competition, which gave consumers more choices. Under those circumstances, meeting customer needs became an imperative for business success. 4. How do nonprofit organizations compare to businesses? What role do nonprofits play in the economy? How do they interact with businesses? Their primary goals are not to make profits like businesses but to improve the quality of others. They have a role in the economy because they do still employ and make revenue like business and spread nationwide. 5. What are the factors of production? How can economies grow when one or more of the factors is weak? Natural Resources, Capital, Human Resources, Entrepreneurship. It appears as though entrepreneurship is the most important with the examples of China and Russia failing while places like Hong Kong and the United States flourish. 6. What are the 5 dimensions of the business environment? Discuss the key elements in each area as they relate to U.S.-based businesses. Economic- advertisement...
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...children would not be able to work with any type of machinery (heavy), would not work long hours, and that at least they got paid minimum wage. Additionally, unions worked to have workers reduced their demanding 12 hour shifts and reduce them to an 8 hour shifts. Every influential union, permits workers to negotiate in opposition to the company they worked for and use the following tools for getting what they want: picketing, strikes and boycotts. Nevertheless, unions began to drop in how many members were joining in the middle of the 20th century. Whether due to the economic collapse or employees wanting additional control over their own fates and the unions becoming out-of-date due to several obligatory laws being voted for by Congress to defend the employees’ on the job....
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...Federal Reserve System and takes a look at what causes a recession and how the FED responded to the most recent one. A recession can cripple a nation if not handled properly. With this paper, I explain how necessary interest rate cuts, the purchase of bonds and mortgage backed securities, and company bailouts were needed to prevent a second Great Depression. These actions will result in the United States creating low, short term-interest rates (near zero) through 2014. The Federal Reserve Response to the Recent Recession This paper examines the history of the Federal Reserve (FED) and how they responded to the recent recession. The goal of this paper is to give the reader insight on the history of the Federal Reserve System and how it was formed. The reader will gain knowledge of what a recession is and how the FED responded to the recent one. The data used for this paper consist of a literature review of articles from the internet websites of NY Times, Federal Reserve. History of the Federal Reserve System (FED) The Federal Reserve System, commonly known as the FED, is the central bank of the United States. Congress established this bank (signed off by President Woodrow Wilson) on December 23, 1913. It was initially created to provide the nation with a safer, more flexible, and more stable monetary and financial system. This was in response to a series of financial panics, particularly the 1907 Bankers Panic...
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...create a committee to assess and decide the amount awarded to their leaders. There are myriad of viewpoints towards Dodd-Frank from the detractors and proponent of the law. Individuals who are against the law believe that it is inflexible and will hurt businesses. The supporters of the law understand that this will limit the power of the financial institution. Dodd-Frank Act In 2008, the country was going through one of the worst financial crisis in history that resembled the Great Depression of the 1930’s. It not only affected the U.S. but also threatened the total collapse of large financial institutions around the world. Banks began engaging in dangerous business practices that was encouraged by investors on Wall Street. Many of the financial institutions preferred profit over principle procedure that ultimately hurts the borrower. The U.S. automaker was also part of the global recession, and this was due to competing foreign auto manufacturers. The price of gas began to increase causing...
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...Alan Mulally, CEO, Ford Motor Company Dr. Obi. Iwuanyanwu BUS520 Organizational Behavior August 8, 2011 Discuss the role of leadership and how it can impact organizational performance. Leadership can have huge impact on organizational performance. The role of leadership is the act of motivating a group of people towards a common goal. Intelligence, maturity and breadth, achievement drive and integrity are key traits of most successful leaders. Less effective leaders don’t tend to possess these same traits even though these key traits don’t always determine the success of a leader. In order to successfully lead any team being smarter than their subordinates is a great start while the absences of knowledge that inferior workers have could delay performance. Effective leaders are driven by completing goals and moving on to the next goal without primarily counting on employees support or motivation to reach them. With the variety of traits shaping the leadership role integrity in opinion is the key trait that can determine if a leader can be successful or not in the long run. Employees very often have a hard time trusting a leader who is hypocritical and doesn’t follow their own values. Honesty and trust can determine the level at which employees will follow the leader without negative vibes. The degree of integrity in a leader reflects the attitude and performance of employees and vice versa. In order for any company to succeed, there needs to be someone to lead...
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...1. Discuss the role of leadership and how it can impact organizational performance. Leadership is defined as “establishing a clear vision, communicating the vision with others and resolving the conflicts between various individuals who are responsible for completing the company’s vision.” (Vitez) Leadership can have an impact on an organization’s performance. Business owners will set the leadership tone for their organization by developing a mission of values to operate their company. Company policies or guidelines are set from the company's mission or values “Successful organizational performance relies on the proper behavior from managers and employees.” (Vitez) Effective leadership can transform an employee from a worker completing tasks to a valuable asset to the team by instilling an ownership mindset. Employees with this belief they often find ways to improve their attitude and productivity. Leadership skills can also be used to get managers and employees on the same page with the same goal and to correct poor business practices. 2. Discuss Mulally’s leadership style at Ford Motor Company and provide examples of how his actions fit this style. Alan Mulally has a combination of a relationship behavior style and a task behavior style. In the case it is stated, “Mulally’s leadership has resulted in Ford making some strategic moves.” (Hellriegel, & Slocum page 543) His skills and style helped Ford to move ahead in the industry during an economic recession. ...
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