HRM-587: Managing Organization Change Project Proposal
Overview of Organizations
September 14, 2015
In late 2008, Chrysler and General Motors announced to the world they were in danger of folding. At the time, our president, George W. Bush, agreed to a temporary bailout, but handed the auto companies' long-term future over to his successor, President-Elect Barack Obama. President Obama then lead a comprehensive bailout of the two companies that allowed them to stay in business but imposed numerous conditions that, it was intended, would secure their viability and allow the companies to eventually return to profitability. In an interview in the Detroit News (Shepard 2015), President Obama explained his decision this way: “There was clear-eyed recognition that we couldn't sustain business as usual. That's what made this successful. If it had been just about putting more money in without restructuring these companies, we would have seen perhaps some of the bleeding slowed but we wouldn't have cured the patient. The automobile industry was one of the most effected sectors during that recession. Chrysler and General Motors were pushed into bankruptcy and 276,000 jobs in the automobile and parts industry were destroyed. That equates to a whopping 36 percent of the total employment in the sector (CHU. T.H. & YINGZI, 2010). Not only were the jobs of all of GM and Chrysler's employees, but the jobs of people who worked for hundreds of suppliers, from stereo manufacturers to steel and rubber producers. Estimates of the potential job losses topped one million. Both companies in the last 25 years have undergone major facelifts ranging from filing bankruptcy, implementing new leaderships and names changes. In the beginning, there was Chrysler Corp, and then in 1998 Chrysler begat DaimlerChrysler which in 2009 became Chrysler Group. General Motors suffered the same fate and obstacles having to change their name from GM Corp. to today's GM Co. (Miel, 2014). Following dramatic drops in automobile sales throughout 2008, two of the "Big Three" U.S. automakers – General Motors (GM), and Chrysler – requested emergency loans in order to address impending cash shortages. (Zywicki,, 2015). By April 2009, the situation had gotten so bad that both GM and Chrysler were faced with imminent bankruptcy and liquidation. With the intent to prevent massive job losses and destabilizing damage to the entire manufacturing sector, and the federal government provided unprecedented financial bailout ($85 billion) support to allow the companies to restructure via Chapter 11 bankruptcy. Both companies separately filed for this protection by June 1. It is fair to say that no one involved in the decision to rescue and restructure GM and Chrysler ever wanted to be in the position of bailing out failed companies or having the government own a majority stake in a major private company. We are both thrilled and relieved with the result: the automakers got back on their feet, which helped the recovery of the U.S. economy. Indeed, the auto industry’s outsized contribution to the economic recovery has been one of the unexpected consequences of the government intervention. The automakers’ future success will depend on their own managerial decisions in the years to come. The fact that Ford was able to weather the economic downturn and financial crisis because it had taken precautionary steps and efforts to restructure before calamity hit, while GM and Chrysler could not have survived without extraordinary government support, is a stark reminder of the importance of good managerial decisions for the survival of businesses. To their credit, the companies restructured to a greater degree than they had ever done before and under extreme pressure, and – after shedding much legacy debt -- returned to profitability in 2010. They also were fortunate that the economy began to turn around and that consumer demand for autos...
References: Chrysler Holding LLC. (n.d.). Retrieved September 7, 2015, from Yahoo Finance:http:.//finance.yahoo.com
General Motors . (n.d.). Retrieved September 7, 2015, from Yahoo Finance: http://finance.yahoo.com
Miel, R. (2015). Auto Industry changed with the times. Plastics News, Vol. 26, Issue 13, pg. 0007 - 0007.
Shepard, David (2015), “Obama heralds U.S. auto turnaround,” The Detroit News, September 10,
Zywicki, T. (2015). The Auto bail out and the rule of law. National affairs. Retrieved from < http://www.nationalaffairs.com/publications/detail/the-auto-bailout-and-the-rule-of-law
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