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Report: 3 Million Jobs Lost if Detroit's Big Three Fail

The Center for Automotive Research said this morning that if Detroit's (former) Big Three -- GM, Ford and Chrysler -- fail, it will mean the loss of 3 million jobs across the entire auto sector in the first year of collapse.

Should Detroit production drop by 50 percent -- suppose the failure of one of the Big Three and a merger between the other two and subsequent contraction -- some 2.5 million jobs would be lost, the report says.

"To permit any of the Detroit Three manufacturers to collapse would scar the U.S. economy further at a time when it can ill afford another blow," David Cole, chairman of the Center for Automotive Research, said in a statement. "The likelihood of one or two of the Detroit Three manufacturers ending operations is very real."

GM and Chrysler are in merger talks and are asking the government for money to facilitate the tie-up.

Ford is struggling with a low stock price and a major investor -- nonagenarian billionaire Kirk Kerkorian -- who's dumping all his shares.

-- Frank Ahrens

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By Frank Ahrens  |  November 5, 2008; 11:39 AM ET
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Comments

The idea that 3million jobs are just going to disappear is crap. There is a certain demand for automobiles in this country. If GM, Ford, and Chrysler all went away tomorrow, that demand would still be there. It might be satisfied by adding shifts at the Toyota plants or by some new company buying up the GM and Ford assets in bankruptcy and churning out the exact same cars under a new nameplate. Either way, the jobs will still be there. Bankruptcy might hurt retirees and would probably eliminate those boocoo wages and gold-plated benefits that the UAW is accustomed to, but most of the jobs would still exist.

Posted by: bill3 | November 5, 2008 1:11 PM | Report abuse

The idea that jobs WON'T go away if any or all of the Big 3 go under... is just CRAP.

You need to pull your head out of your butt, bill3.

And the biggest job losses won't be from the Big 3 themselves...it will be lost jobs from suppliers and even the diner across from the auto assembly plant.

Toyota and the others can pick up the slack eventually, but there WILL be a huge job loss if even one of the Big 3 go under.

I would hate to live in Michigan if that happens.

Posted by: TomIII | November 5, 2008 1:17 PM | Report abuse

Nothing bad can happen now! Didn't you read the papers, we elected The One Who Will Save Us yesterday. He promised to bring jobs BACK to MI, IN, OH, WI so he will simply command the Big Three not to fail.

Posted by: ronjaboy | November 5, 2008 1:40 PM | Report abuse

Tomill, I never said there wouldn't be job losses, just that the three million number is exaggerated. Even if an automaker went bankrupt and was liquidated, somebody would capitalize on the demand for their products, either by expanding their own production and product lines, or by buying the failed automakers assets post bankruptcy. In any of those situations there would be jobs for former big 3 workers. Demand for their products will not just disappear. It will go elsewhere which will create jobs elsewhere.

The most likely scenario is just a bankruptcy reorganization which isn't even that bad. Stockholders would get screwed, retirees would lose their healthcare and possibly part of their pension, and the UAW would see substancial benefit and pay cuts, but the company would probably maintain something close to its current form. Look at all the airlines that have gone through bankruptcy. They're all still around and employing plenty of people. Even for the ones that were liquidated, take Eastern for example, has noone filled those routes? Are you telling me you have to drive to New York now because Eastern went away. Heck, if not for the fuel situation the airlines might even be profitable.

As far as the suppliers, they're in a better situation than the big 3. The whole point of breaking the large suppliers off the big 3 was so they could supply companies other than their mother company. Some contracts may get cancelled, but they'll be replaced by others. Americans aren't going to suddenly stop driving cars. If the supplier properly diversified themselves amongst customers and car models they should do alright, though there will be some job losses in the short term. We are in a recession though, so there's no industry safe from that.

The dumbest thing we could do is designate the automakers as too big to fail. It just promotes inefficiency and poor quality; neither of which the US can afford to be associated with if it wants to both compete on a world stage and have the highest standard of living in the world.

Posted by: bill3 | November 5, 2008 5:10 PM | Report abuse

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