The Macroeconomics of the Auto Industry Bailout

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The Auto Industry Bailout
Detroit, Michigan grew up around the automobile industry. At its peak, Detroit was the fifth-largest city in the United States, becoming the home to over 1.8 million people by 1950 (Davey, Monica 2013). The prolific population was due greatly to the success of the auto industry in the city. At that time, Detroit was flying high, its name coined “The Motor City” (americaslibrary.gov), and automobiles greatly impacted commercialization. From transporting goods to hastening production, to selling parts, to manufacturing and selling new automobiles, the auto industry completely transformed Detroit. Things seemed
Ford was in better shape than G.M. and Chrysler, because it had already mortgaged its assets in 2006 for $24.5 billion (scottbourne 2012). In addition, Ford promised to accelerate the development of hybrid and battery powered cars, increase the production of smaller cars and sell its Volvo division. Ford did all of this without receiving any loans from the government.
The Treasury in 2009 initially forecast it would lose $44 billion on its bailout of General Motors Co., Chrysler Group LLC and their finance arms. That forecast fell to $30 billion by the end of 2009, and as low as $14.3 billion in 2011 (Shepardson, David 2013). In 2009 the auto bailout was extremely frowned upon by US citizens. Opinions swarmed that auto retailers brought the bankruptcy upon themselves, by not producing more energy efficient vehicles (Forexyard 2012). People believed that by agreeing to bail them out at this time, the government would be showing that they support the bad decisions of the auto companies. Many people felt that now is a good time to let these car companies die out and allow a new influx of auto retailers to take over the industry, producing more fuel-efficient cars (Forexyard 2012). Last, when the CEOs of the big three traveled to Washington DC to ask for the bailout, they each traveled in their own private jet. The costs totaled $40,000 per CEO. This ostentatious show of wealth was considered highly