An estimated three to five million jobs, direct and indirect, are dependent on the auto sector.

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taking the us to auto drive

America’s future met America’s past on November 10, and talked on a range of issues, in particular a rescue package for the auto industry in the US. The American economy simply cannot afford one more sector collapsing at this point of time. An estimated three to five million jobs, direct and indirect, are dependent on the auto sector. Keeping these things in mind Obama has suggested an immediate aid for the auto industry from the current American President George Bush.

The alling US economy has already taken a toll on the aviation industry and financial sector leading to a number of companies moving towards a collapse. It seems that it’s now the turn of the auto industry to suffer the pain. The falling sales of the big three auto makers – Ford, General Motors and Chrysler – have put the auto industry in peril, sending another alarm to the US economy. The ongoing recession and the shrinking credit is proving disastrous for the sector and the Detroit trio are saying that sooner or later, they may run out of cash. GM has in fact claimed that it may run out out cash by the first half of 2009. The other two claim that they are not in an enviable position either and are teethering on the edge of bankruptcy. Automakers have asked for $50 billion US in loans and loan guarantees to help them face the current crisis. This does not include the $25 billion that the government has agreed to pay the auto industry to produce fuel efficient vehicles.

So this does indicate that Obama is not averse to a top down approach when it comes to aiding business in peril. He has an additional policy for the auto industry. He plans to give them extra incentives for clean energy technology. Obama plans to subsidise some 10% of health care costs (some $7 billion) of the Detroit trio if they invest half of the money in fuel efficiency research. An alternative idea is invest $3 billion for the next 10 years to remake auto plants for new innovative clean cars.

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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).


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