Americas Auto Industry - Essay Example

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 on the fact that auto sales expected 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 a loss.

The quality of American cars does not compare with Japanese imports. Ten years ago American automakers were selling over 16 million units yearly. In 2009 the projected sales for the industry is 10.4 million vehicles. The government is not supposed 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 other loans seems like a viable alternative.

This case shows that the government represents an important stakeholder for business entities.