In just the latest chapter in the story of our troubled economy, the Federal Reserve agreed to provide loans to America’s ailing auto industry yesterday. At this point we’re all sick of hearing about another industry that needs us to bail it out of trouble, but let’s take a look at what is really happening here.
The first thing to keep in mind is that American auto-makers were in a bad way long before the economy went down the tubes. We had yet to see the worst of this economic downturn when it was already becoming clear that G.M. was going to lose its claim to the title of the world’s largest auto-maker to Toyota.
The frozen credit market and nose-diving stock market took a bad situation and made it that much worse. The Big Three (Chrysler, General Motors, and Ford) were largely barred from access to credit meaning they couldn’t provide car loans to potential buyers. Between pre-existing problems and the new realities of the economy, even some serious penny-pinching couldn’t bring profits back to Detroit.
Now thanks to this perfect storm of financial ruin, the American automotive industry has seen its life flashing before its eyes. They’ve gotten approval for new loans and G.M. and Chrysler are in talks of a merger. If you’re wondering why you should care, here are a few stats courtesy of CNN/Money’s Chris Isidore:
- 10 jobs are dependant on every 1 assembly line job;
- In all, the U.S. auto industry provides 2 million jobs;
- $25 billion in loans may be costly, but the collapse of the Big Three could cost the economy $100 billion or more.
What a mess.
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