Chapter 3 Blog

http://www.economist.com/business/displaystory.cfm?story_id=12638642

Summary:

Recently, car industries such as GM and Chrysler are requesting loans from the government. This is a problem for both the United States and in Europe. The European government is considering giving car manufacturers €40 billion ($51 billion) in soft loans. The GM Rick Wagoner said that they need the loans fast or they may not be able to pay off their bills by the end of the year. Although Ford seems to be doing better than Chrysler and GM, chief executive Alan Mulally, predicts that Ford will also go bankrupt due to the fact that this will be a big impact on the suppliers. Some such as the European Commissioner believe that the big car producers should receive help because they are important and traditional car makers. However, Neelie Kroes (competition commissioner), believes that giving loans to these car makers will be unfair for the other car makers out there.

Chapter three connections:

This article talks about government involvement which is what chapter three is about. Even though car companies such as GM and Chrysler are privatized companies, they are still requesting money from the government to avoid bankruptcy. As a result, this will have negative third-party effects on the people that are living around the area because of the pollution caused by the cars. If the government loans the money to these companies, then it will be unfair to other competitors. On the other hand, many small car companies depend on the these three big businesses to operate. However, if the government does not loan money to them, then there are many jobs that would be lost. All in all, both choices lead to bad consequences.

Personal Comment:

Since i lived in Vancouver for all my life, i have seen many GM and Chrysler cars. Although the government should not lend money to private companies on normal circumstances, I think they should in this Situation. In my opinion, this is not just about saving the big companies, but instead it is to protect the people's jobs. Since we are in recession, I believe that the car makers should receive help to avoid going into a more serious state we are in now. I have seen commercials a few months ago that were advertising cheaper cars for about $18,000, but now they go as low as $8,000. I have never seen a new car sold for such a low price in my life time before. Also, if the companies do go bankrupt, the other car makers might not have such smooth time either because many people will lose their jobs. As a result, there will be a decline of consumers that are going to buy vehicles. Even though these three companies are American owned, there are many factories built in Canada (mostly in Ontario). As a result, these companies provide jobs for the Canadians and if these three major car companies were to close down, that will leave not only Americans unemployed, but will also leave many Canadians unemployed too.