How Will the Bailout Affect Foreign Automakers?

The U.S. government agreed to a $15 billion plan to bail out the big three automakers, but the package serves as only a temporary measure until a more permanent decision is reached. However, the temporary measures have provided hope for not only the U.S. automakers but also foreign automakers that have remained largely silent during this whole crisis. The big question now is whether or not they will be passed and the industry will be saved.

The proposed bailout package would provide a $15 billion loan to General Motors and Chrysler in order to stay in business while requiring them to restructure their operations to ensure repayment. The legislation would also include protections for taxpayer dollars, including the appointment of a federal official to oversee the automotive industry who could force the companies into bankruptcy if the companies don’t come up with a business plan by the deadline of March 31st.

Foreign automakers like Toyota (TM), Honda (HMC), Hyundai (HYMLF.PK) and Nissan (NSANY) have pumped some $40 billion into 70 American facilities in the last 30 years and are also banking on a bailout. The manufacturers rely on many of these same parts suppliers as the big three automakers and therefore stand to lose out upon any failures. After all, any failures in the automotive industry will likely result in failures among part supplies, which could be disastrous for the industry.

So, will a long-term bailout pass government circles at the end of March? Well, the reasons behind the automaker bailout must be addressed, but few can agree on exactly what the problems really are. Some believe that wage disparity is to blame, but a recent report showed that a lowering of wages would only reduce prices by $800. Instead, many experts insist that the automakers must reinvent their image to the American public in order to spur sales. Whether or not this is possible remains to be seen.