Automotive Insider

How Are the Big Three Doing Now?

The big three US auto makers (Ford, General Motor, and Chrysler) have been one of the central issues of the current recession. The controversial bailout of the auto industry piqued interest in these companies for the first time in a long while – after all, $62 billion taxpayer dollars went into the funding. The TARP (Troubled Asset Relief Program) was the bill that provided funds to the auto companies.

Steven Rattner, president Obama’s former “auto czar” recently spoke up about the bailouts, touting them as a success story. Allowing the companies to manage their own problems would have led to a more widespread, deeper, and more prolonged depression, he said.

Ford suffered their worst year ever in 2008, posting a $14.6 billion loss. They did not accept bailout money from the government, which was a huge shock. The company finally showed a profit in the second quarter of 2009, at $2.3 billion for the quarter. Currently, Ford is trying to negotiate with the United Automobile Workers union to cut labor costs even further. However, as of October 27, the union rejected the cuts. They have had two rounds of concessions in the last two years, and Ford was asking them for a third round. The company claims they need modifications to avoid bankruptcy, and to remain competitive with GM and Chrysler.

“The workers are essentially saying enough is enough, that they don’t see enough of a case for further concessions. Ford had been making a case that it was doing better than General Motors and Chrysler, and as a result they have painted themselves into a corner, claiming that they were turning around but at the same time trying to claim that they needed major concessions to turn around,” said Gary Chasion, a professor of labor relations at Clark University in Worcester, Massachusetts.

General Motors has heavily restructured and laid off a huge number of employees to meet their goals. Former CEO Rick Wagoner was replaced in March with Fritz Henderson, who had been the Vice President of General Motors since 2006. Now mostly owned by the United States and Canadian governments, GM exited bankruptcy on July 10, 2009. No public shares are available to the public, but GM plans on an IPO in 2010. On the day they came out of bankruptcy, GM announced they would be cutting their workforce in the US by 20,000 employees as part of their reorganization.

Rattner mentioned this week that there was a strong case for letting Chrysler fail – but that “felt like an unacceptable risk”. Chrysler, more than any other American auto maker, depended heavily on Jeeps, minivans, and pickups as the bulk of their offerings. Chrysler only spent 42 days in bankruptcy, after declaring it on April 30, 2009. Instead, Chrysler opted to partner with Italian company Fiat, which started with a 20% stake in the company. If financial and developmental goals are met, this stake could increase to 51% eventually. Currently, the rest of Chrysler is held by a union retiree trust, and the Canadian and United States governments owning the rest.