Program Purpose and Overview
Several efforts were initiated under TARP to address the condition of the American auto industry during the financial crisis. The Automotive Industry Financing Program (AIFP) was launched in December 2008 to prevent the uncontrolled liquidation of Chrysler and General Motors (GM) and the collapse of the U.S. auto industry. The potential for such a disruption at that time posed a significant risk to financial market stability and threatened the overall economy. It could have also had disastrous consequences for other auto manufacturers and the many suppliers and other businesses that depend on the automotive industry. This could have led to a loss of as many as one million American jobs. Recognizing that both GM and Chrysler were on the verge of collapse, the Bush Administration extended temporary loans to both companies and their financing entities in December 2008.
When President Obama took office, he decided that he would not commit any additional taxpayer resources to these companies unless they developed plans to achieve long-tern viability. The Obama Administration rejected the initial viability plans submitted by GM and Chrysler and required both companies to develop more ambitious plans, under which all stakeholders, including unions, dealers, creditors, and others, would make substantial sacrifices. Both companies brought in new management, and their operations were restructured through proceedings in bankruptcy court in record time. These actions paved the way for a turnaround of the companies and the entire domestic automotive industry.