Automotive Industry Crisis Case Study

Fueled by the 2008 recession, the automotive industry suffered a crisis that hurt the United States’ national economy.

Lead Up to the Crisis

The automotive industry crisis of 2008–2010 was a part of a global financial downturn. General Motors, Ford, and Chrysler, also referred to as the United States Big Three automakers, had limited access to offshore production, unlike their foreign equivalents. The New York Times wrote, “For the most part, the so-called auto transplants – foreign-owned car companies with major operations in the United States – have deep pockets and ample credit, and they are not facing potential bankruptcy like General Motors and Chrysler." Because of the rise in gas prices, fewer Americans were buying cars, thus disturbing the automotive industry. As the New York Times believed, the only reason foreign-own car companies were not struggling was because they were getting sales from the

Some also saw that the Chapter 11 would give more problem rather than fix them. Promoting a government-facilitated solution, the Brookings Institution argued that the Big Three make automobiles that not enough Americans want to buy. This, if found to be a problem, would not be solved by the Chapter 11 bankruptcy focused on cost-side considerations like wages and benefits. Their strategy would make the company better able to organize the plant and employee resources by transferring or selling the Big Three’s assets to other firms. Another idea that could have helped the bankruptcy would have been a merger between one or more of the Big Three. It would have facilitated cost savings and focused on the most profitable brands. Unfortunately, the United Auto Workers opposed the move because it would have involved layoffs. The Big Three were considering bankruptcy due to the fact that they were struggling to pay their employees the pay they