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The Rescue of the US Auto Industry, Module Z:Overview

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Abstract

In the fall of 2008, credit markets tightened amid a broader economic downturn that severely impacted the US auto industry, especially the three largest domestic manufacturers, General Motors (GM), Ford Motors, and Chrysler. The companies requested assistance from the government in a bid to stay afloat, but Congress declined to authorize funding. The Bush administration, however, provided bridge loans to GM and Chrysler under the Auto Industry Finance Program (AIFP), funded through the Troubled Assets Relief Program (TARP), to sustain them until the Obama administration was in place. Within months, the Obama administration decided that a speedy bankruptcy would be the appropriate way to restructure the companies into viable organizations. Treasury provided financing via TARP as Chrysler, then GM, went through an expedited bankruptcy process. In support of the restructurings, Treasury also provided assistance to GMAC, Chrysler Financial, and to certain auto suppliers, in addition to supporting consumer warranties, bringing total government support for the industry to approximately $80 billion. Although the government lost money on the AIFP, the rescue was relatively popular politically and both companies returned to profitability in 2011. This case discusses the various aspects of the government's assistance to the auto industry that began in December 2008 and wound down in December 2013.

Suggested Citation

  • Metrick, Andrew, 2022. "The Rescue of the US Auto Industry, Module Z:Overview," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(1), pages 300-367, April.
    • Handle: RePEc:ysm:ypfsfc:4199
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    References listed on IDEAS

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    1. מחקר - ביטוח לאומי, 2009. "National Insurance Programs - 2009," Working Papers 26, National Insurance Institute of Israel.
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    3. Henken, Benjamin, 2022. "The Rescue of the US Auto Industry, Module G: The Auto Warranty Commitment Program," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(1), pages 282-299, April.
    4. Nygaard, Kaleb, 2022. "The Rescue of the US Auto Industry, Module B: Restructuring General Motors Through Bankruptcy," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(1), pages 93-119, April.
    5. Board of Governors of the Federal Reserve System (U.S.), 2009. "Study of Auction or Bulk Refinance Program," Reports and Studies 501, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    auto industry; bankruptcy; Chrysler; General Motors; restructuring; TARP;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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