Current News Report – Research Paper Example

America’s auto industry is facing its toughest economic challenge in its 80 year history. Last December after the bailout package that salvaged the banking industry the auto industry received a governmental loan of $17.7 billion dollars to provide liquidity auto makers with liquidity. General Motors and Chrysler are claiming that the original business loan was insufficient and that they need another $21.6 billion to prevent bankruptcy from occurring. These companies are basing their claim in the fact that auto sales expect to decline a lot in 2009. If sales go down the company’s cash reserved gets depleted and if it reaches cero the company would be unable to pay for its operating expenses. At that time the bankruptcy scenario is valid and hundreds of thousands of direct and indirect jobs would be loss.
The reason the American auto industry is at the blink of extinction is because of years of bad business decisions that created production wastage and other inefficiencies. The quality of American cars does not compare with Japanese imports. Ten years ago American auto makers were selling over 16 million units yearly. In 2009 the projected sales for the industry is 10.4 million vehicles. The government is not suppose to get involved in the business decision of private entities, but due to the historic value of the industry, the reality of the imminent collapse, and the massive job loss associated with the existence of the industry another loans seems like a viable alternative. This case shows that the government represents an important stakeholder for business entities.
Works Cited Page
Google.com. 24 February 2009. “Us can’t walk away from car industry: Obama.” 25 February 2009.