Con: Should the United States government have bailed out the automobile industry? Introduction A. In 2009, the .“Big Three” (GM, Chrysler, and ford) were facing fmancial struggles. They were fuced with a decision: either try and work through their problem on their own by securing loans, or to go to the government for help. Of the Big Three, only Ford declined government assistance, having already secured a line ofcredit in 2006 by using all of their assets as collateral. GM and Chrysler filed for a managed Chapter 11 bankruptcy that was funded primarily through the U.S. Treasury using taxpayer money. This modified version ofChapter 11 bankruptcy that was implemented by the U.S. government appeared to have allowed these automakers to survive for the time being, but it came at the expense ofthe taxpayers and it did not address all ofthe problems that caused the Big Three’s issues in the first place. I. The Big Three’s poor managerial choices created their financial problems, and the taxpayers’ money shouldn’t be bailing them out. A. GM, Chrysler, and ford continued to focus on and mass produce large trucks and SUVs because of their higher profit margins despite a growing concern over increasing fuel prices between 2002-2007. 1. Research done by Thomas Klier of the Federal Reserve Bank of Chicago indicates that during the span of 2002-2007, “about 40 percent of the decrease in U.S. market share has been caused by the recent increase in the price of gaso line.” 2. More specifically, research done by Meghan Busse and F brian Zettlemeyer of Northwestern University and Christopher Knittle of UC Berkeley showed that through the period of 1999-2006, “a$1 increein goIinepricewiII decree the market share of cars in the least fuel efficient quartile (< 17.7 MPG) by 11.5%.... that a $1 increase in gasoline price will increase the market share of cars inthemofu effidentquatile(>24.3MR3) by 15.1%” B. They allowed legacy costs to build by continuing to give out large pension plans when foreign auto makers were switching to more realistically defined contribution plans (4OlKs) back in the $Os. 1. The average per-hour base salary ofa U.S. auto worker and a foreign auto worker were about the same ($28/hour in 2007) but each worker actually cost $73.21/hour compared to $44.17/hour of Japanese competitors, with the difference being the additional benefits promised. C. U.S. autornakers should have switched to defined contribution plans (4OlKs) in order to stay competitive and keep costs sustainable. 1. GM didn’t officially freeze their pension plans until February of2012. a. This meant that they would no longer contribute to the pension plans of workers who were promised them upon employment. Those employees would now receive 4OlKs (defined contribution plans), a change that should have been made decades ago to avoid current financial struggles. II. There was no market failure and the U.S. auto makei should have filed for traditional Chapter 11 bankrup.