Automakers could cost economy 3M jobs
The impact from a Big Three downfall could cost as many as 3 million jobs and $60 billion in the first year, report says.
NEW YORK (CNNMoney.com) -- With auto sales at the weakest pace in 25 years and the Treasury's decision not to aid ailing automakers, job losses in the struggling industry could potentially get much, much worse.
If the Big Three carmakers were to cut U.S. operations by 50%, 2.5 million jobs could be lost in 2009, according to a study released Wednesday.
The Center for Automotive Research (CAR), reported that the total employment impact includes nearly 250,000 jobs lost at the automakers and nearly 800,000 at auto industry suppliers.
In addition, CAR projects that there would be over 1.4 million additional job losses outside the industry, such as those lost from store closings in the community hit by a plant closing.
In economic terms, cutting operations in half would reduce personal income by over $125.1 billion in the first year, and $275.7 billion over three years, CAR said. And the impact of this personal income loss would cost the government $49.9 billion in 2009, and over $108.1 billion in total tax losses over three years.
Big Three automakers GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler employ hundreds of thousands of well-paid workers and support far more retirees and their families with health care and other benefits. In addition, dozens of suppliers and thousands of dealerships depend on the Big Three.
"The likelihood of one or two of the Detroit Three manufacturers ending operations is very real," David Cole, chairman of CAR, said in a statement.
But a larger fear is a complete shutdown.
If there was a 100% reduction in Big Three operations, CAR estimates that about 3 million jobs would be lost in the first year alone.
"A complete shutdown of Detroit Three U.S. production would have a major impact on the U.S. economy in terms of lost wages, reductions in social security receipts, personal income taxes paid, and an increase in transfer payments," Sean McAlinden, CAR chief economist, said in the release. "The government stands to lose on the level of $60 billion in the first year alone, and the three year total is well over $156 billion."
Year to date, the auto industry has announced 110,610 job cuts, more than double than the same period in the year before, and the highest of any industry with the exception of finance, according to a report released Wednesday by global outplacement firm Challenger, Gray & Christmas.
Over 15,000 layoffs were announced in the automotive industry in October alone, the report said.