By Jerry Reynolds November 11, 2013
November 2008, to those of us in the auto industry, will be one of those months you will always remember. The country was stinging over the financial crisis that had hit our nation. The failure of Lehman Brothers is mid-September 2008 had sent shivers through people, and crashed consumer confidence, one of the main drivers of auto sales.
When auto sales from October began rolling in on the morning of November 3, it was clear that it was going to be a disastrous month for everyone. By the end of the day when every manufacturer had reported in, sales dropped 32% from a year earlier. December of 2008 brought a drop of 36%, followed by January 2009 down 40%. The auto industry was in a free fall.
November 4, 2008 was national Election Day with Barack Obama being elected, but there was a lot of tension behind the scenes at the Detroit 3. Two days after the election, all three CEOs met behind closed doors with top Congressional leaders. Although bitter rivals, the heads of General Motors, Ford, and Chrysler banded together to tell our national leaders it was going to take a minimum of fifty million dollars to save the U.S. auto industry and hundreds of thousands of jobs.
The first public bombshell came on November 7, 2008. It was then revealed to the world that General Motors would run completely out of money within a few months. Then CEO Rick Wagoner made the stunning announcement. By this time, it was clear GM would lose in excess of thirty billion dollars in 2008. Insiders said the daily cash burn “was astounding”.
On the 18th of November, 2008 the Detroit 3 CEOs testified before Congress, asking for bailouts. Wagoner, Ford CEO Alan Mulally, and Cerberus (parent company of Chrysler) CEO Robert Nardelli painted a picture of doom and gloom. Unfortunately, all three flew in private jets to the hearings, asking for public money.
On November 21, 2008 the General Motors Board met to discuss for the first time the possibility of filing bankruptcy. The situation was dire and the corporation could not borrow any money and the end was near.
Less than a month later, President George W. Bush announced a 13.4 billion dollar bailout for GM and Chrysler, Ford had decided to go it on its own.
This kicked off a chain of events that was epic in an industry that had just a few years earlier enjoyed enormous success. We now know that by March 2009, President Obama would determine that GM and Chrysler did not meet the terms of the agreement made with the Bush administration and the Treasury Department crafted a plan for a “controlled bankruptcy” of the two auto giants, which went in effect on June 1, 2009. That would lead to the closure of hundreds of dealerships, and the elimination of Saturn, Hummer, Saab, and Pontiac.
Fast forward to 2013 to find the Detroit 3 healthy, profitable, and building the best cars they ever have. Many people opposed the bailouts, and we will never know what would have happened had the Government not stepped in. Many thought the residual effect on dealers, suppliers, and auto related businesses would crater the entire U.S. economy.
The one thing we know for sure is that it all started in November 2008, just five short years ago.