The Rescue of the US Auto Industry, Module A: Automotive Bridge Loans

In 2008, in the midst of the Global Financial Crisis, America’s Big Three automakers neared their breaking point. Two of them, General Motors (GM) and Chrysler, asked Congress for funding to prevent uncontrolled bankruptcies. Policymakers realized these uncontrolled bankruptcies would damage the manufacturing sector. Congress considered but failed to pass a framework conditioning short-term financing on the companies’ producing acceptable restructuring plans. With the companies warning that they could not survive the coming presidential transition, on December 19, 2008, President George W. Bush announced the Automotive Industry Financing Program (AIFP) under the authority of the Emergency Economic Stability Act (EESA) of 2008, which made up to $17.4 billion available to the two companies. After two extensions to GM, the government would lend a total of $23.8 billion to GM and Chrysler under this program, funding the companies from late 2008 through their mid-2009 bankruptcies (the Bridge Loans). This case discusses these Bridge Loans, which helped the companies survive the presidential transition and begin creating plans to survive bankruptcy.