Detroit Three Failure Would Cost at Least 1 Million Jobs

Detroit3ceos

There has been a lot of talk about the Detroit Three — GM, Ford and Chrysler — going down the tubes lately. There’s even been speculation about all the jobs that would be lost as a result. It’s not ridiculous to think that many more jobs would be impacted on top of those directly related to the three companies, but we’re not sure how one creates such a figure. 

So, as we all go about yelling at our nightly newscasts for the next few weeks about a bailout, remember this: The Detroit Three directly create nearly 1 million jobs in the U.S. alone. Here’s the breakdown: 

U.S. Jobs

GM: 96,000, down from 176,000 in 2000
Chrysler: 49,120
Ford: 80,200 in North America.  Ford won’t break down the numbers for U.S.-only jobs, but it did say a vast majority of that figure are in the U.S.
Detroit Three dealerships: 740,000

Total:
965,320

So for the sake of argument — and my poor mathematical skills — let’s just say 1 million jobs. According to the Bureau of Labor Statistics, the total number of unemployed people through October in the U.S. is 10.1 million. If the Detroit Three went down, they would almost double the total unemployment figure so far this year, which is 1.2 million. The loss of another million jobs would send unemployment to 7.1%, assuming no other jobs were lost in sectors like retail, which is facing a bleak holiday season.

There is a huge supplier network that is completely intertwined with the Detroit Three, and if just one of the large ones, like Delphi, closes — with approximately 50,000 U.S. employees — you’re above that looming 1-million-jobs mark. And that’s just one of dozens of large and small suppliers across the country that would likely collapse along with the Detroit Three. That’s how we were confident enough to run that headline.

So how did that 2.5 million number you hear on the news come about? It includes suppliers as well as secondary jobs, like local bars, restaurants, real estate offices, etc. based in towns that rely on auto plants. Advertising agencies and publications that count on automotive ad revenue would also start laying off workers. Many have even suggested that businesses near car dealerships would be impacted.

We just wanted to point out that even the number of jobs you can positively account for is still massive and daunting, giving a real face, or a million of them, to the potential bailout — or bridge loan, depending on your point of view — being discussed in Washington. In comparison, the $122 billion bailout of AIG focused on a company with more than 100,000 employees, many of them outside the U.S. (that’s another company that doesn’t divulge country-specific figures).

If you have a strong opinion about bailing out the Detroit Three, you should contact your local congressman or senator.

Figures were supplied directly by manufacturers and NADA.

By David Thomas | November 13, 2008 | Comments (37)
Tags: In The News

Comments 

KeithO

I think the Feds should bail out the Big 3, but with conditions:

1. GM HAS to rid itself of HUMMER, Saab, GMC, Saturn, and maybe Pontiac or Buick. It's cheaper to maintain three to four brands than eight.

2. The top executives MUST sacrifice some of their perks for the greater good. NO bonuses (they've proven they don't deserve them), stock options, or anything else until they pay the money back IN FULL.

(Incidentally, Rick Wagoner and the GM Board of Directors should tender their resignations IMMEDIATELY. Their complete incompetance has driven this great company into the ground. AND NO GOLDEN PARACHUTES!!!)

3. They MUST develop concrete plans to better adapt to the changes in the American market. They thought the big SUV/truck boom was going to last forever. They were wrong. And look where it got them.

In short, in order to get the money, they MUST work harder and faster to produce better vehicles more efficiently than they currently do.

I'm probably missing a couple of things they need to do, but I think they can pull it out if they did what I suggested above.

There are so many issues there's no clear cut answer in my mind which is a huge problem.

The govt could provide protection from dealer compensation to close brands like you mention above. That would save them the costs of shuttering underperforming brands like Saab, Hummer and Saturn. GMC and Pontiac still sell a lot of cars and trucks.

I believe Ford has already curtailed the bonuses for top management.

I'm not sure on Wagoner either but there's no way a 15 year trend of buyers snapping up SUVs and trucks changing in the course of 6 months could have been predicted. Toyota certainly didn't predict it. A year ago they double downed on the truck market with the Tundra.

The big elephant in the room is Chrysler.

My guess is if the 3 get access to bailout money one of the request scenarios will be cash for a GM/Chrysler merger.

And the armchair CEOing begins.

Mike

Ch. 11 in itself does not mean the end of GM, nor does it mean all of these jobs would go away. CH 11 is just a restructuring, nothing more. The only people impacted are the ones that should be. That would be the union with their outrageous defined pension plans and other benefits program.
If GM could shed their UAW agreements, and the entire legacy cost, the company would be positioned for growth. I do not think that most people understand that many of the poor management decisions were made based on keeping plants open, and balancing lay off’s that did not save money (Job Bank), or selling cars at a loss to sustain legacy jobs with legacy costs.

Getting rid of all of those divisions would defeat the purpose of bailing them out to save jobs, but I do agree with you about Hummer and Saab.

KeithO

Actually, the armchair CEOing began long before I posted my first comment. I don't have all the answers; in fact, I never claimed to. I just offered up suggestions from MY point-of-view, as a car enthusiast and supporter of the American auto industry. That's all.

This is what comments are for.

Mike,
The 3 already restructured their union agreements. That's not a problem after 2009.

Bankruptcy would completely kill consumer confidence and they wouldn't sell enough cars to stop the burn in cash. It would just get worse.

But I agree. Even with a bailout we're looking at a lot less jobs. But the losses won't be as severe as 1 million. not even close.

A

My suggestion, along with the others above, would be to kick out the UAW. They only inflate costs and have outlived their usefulness in my opinion.

If Chrysler tanked or merged with GM, how would the joint agreement between them and Nissan to build vehicles for each other be affected?

Mike,
It is so easy to say just file Ch.11 and be done with all the legacy costs and agreements in place. But firstly, even if they file for Ch.11 they still have to have money to operate the company and no one is lending them money now let alone if they were in Ch.11. Secondly, what do you now do with all the retirees out there who have now lost their pensions and healthcare? Their burden is now shifted to the government which is in no shape to take on this burden. Thirdly, they already have agreements in place to deal with the legacy costs and reduce their labor costs which is a matter of time before they take effect. That time is what has evaporated due to the historic shift in consumer buying habits and the bursting of the housing bubble and the meltdown of the credit market.

Ken L.

In addition to what KeithO mentioned, I think the UAW contracts will need to be dissolved and the entire Detroit 3 will need to function more like the imports. Sorry, but if you keep throwing money without any new rules/structure in place, then you’re basically funding a failed business that will keep coming back to more money later on. The bailout of the banks created more regulations and some even changed their business model from investment banks to bank holding companies. And if the bailout does go through, I don’t think GM and Chrysler should be merging since that would lead to job losses on both GM and Chrysler’s side; the only winner would probably be Cerberus. And why the hell are those CEOs smiling like they just hit the lotto?

Function more like the imports? As in continue to suck money out of America and back to their home countries thereby creating wealth in their country all the while fooling the American public into thinking they are looking out for the greater good of America by opening factories and creating jobs here?

Ken L.

To Anonymous,

Yes, just like that, all while keeping plants in America as well. Wake up buddy; we’re in a global economy.

Mike

Dave:

I do not believe the new 2009 Union agreements go far enough to make GM competitive. Think about all the jobs that could be created for the next generation of Americans entering into the workforce at current market rates for factory workers?

I also do not believe that that the public would stop buying cars from GM if they are in Ch11. This point is up for debate of course, but GM will survive in one form or another.

Finally, the government is going to be on the hook for the pension / retiree benefits no matter what. A bail out now that does not help GM address the core business issues, or CH11 that can actually force them to make the decesions that will make them competitive.

Mike,
We'd all be on the hook for the pensions if they go under chapt 11 or fail completely and it could crash the govt's emergency pension fund to boot.

Ken L.

Mike,

I wouldn’t buy a new or used car from a company that is bankrupt, just like I, and many others, do not bank with banks that are in bankruptcy. You just don’t want to risk it. But I do agree with paragraph 3.

Bowrider

I just want to point out that the unemployment rate considers only those who are looking for jobs. Granted, most of those who would potentially lose their jobs, would look for new ones, but you can't assume that all of them will and therefore correctly calculate the unemployment rate. I know I'm "in the weeds" with that comment, but it should be noted. That being said, I don't want GM to go under, but don't necessarily think a bailout is the answer.

Len

The UAW caused a lot of the problems. I find it funny that the UAW thinks they are still needed and do a good job. The Imports build cars here cheaper. Why...No UAW and the employees for the import factories here still get very good pay. The UAW does not realize that they are killing the Big3 by striking when they don't get there way. If they go into chapter 11, the first restructuring I would do is go totally non union.

VegasBob

After all the years the BIG 3 relied on TRUCK's & SUV's, and didn't foresee that Gas Prices would eventually go up?
As much as I would love to buy an American Car, I have had many issues with my 2005 Escalade & none with my 2003 MB ML320.
The BIG 3 needs to make a more reliable & dependable car's.

hek

Mercedes, BMW, Nissan, Toyota, Honda and Subaru all build cars here. They seem to be fine. what is wrong with this picture?

hek

Mercedes, BMW, Nissan, Toyota, Honda and Subaru all build cars here. They seem to be fine. what is wrong with this picture?

Jerry

No business deserves to stay afloat if they can't compete on a level playing field. GM and Chrysler deserve to go under as they build inferior products that no one wants. How ironic is it that little Honda came here sold cars, then built them here, and now crushes the Detroit 3 in all car classes. I'm not talking Toyota, I'm talking Honda! I say to GM and Chrysler - Don't let the door hit you in the ass!!

I didn't reference Ford in my post as I believe they could make it on their own as they have a CEO with a proven track record of accomplishments.

Hek,
The Japanese and German govts have health care and fully back their auto industries. That's what's different. Toyota is also taking a huge hit right now. they just have better cash reserves.

http://gmfactsandfiction.com/

I encourage everyone to read about and educate themselves on this crisis and our auto industry, yes the AMERICAN auto industry. It is time to stop with the vindictiveness and viciousness with which you fill the Internet. The time has past to continue with this naive "whatever, they brought it upon themselves" attitude. The thought of collapse of our domestic auto industry is not something to be celebrated, it should be feared.

ziggy

Anon-

Thanks for the website...BTW created by GM.

I don't really think that a bailout is the answer. It's like pumping water out of sinking ship without plugging the hole. I think part of the problem is the UAW and part of it is production of cars that people don't want. They definately need to reduce the number of vehicle models they produce, get rid of some of the lard at the top and produce more fuel eficient ones.

Ken L.

To Anonymous,

I don’t think any of us here are welcoming a bankrupted American Auto Industry. Without competition, there will be less choices and higher prices. Look at the XM and SIRIUS case as well as banking industry. There will only be a handful of big and powerful banks to charge whatever fees they want after the credit crises is over. What we want is for the America Auto Industry to be competitive with all others in terms of accessibility to their markets, labor cost, executive salaries, etc. That is not the case right now.

Troy S.

Why is it fair to give failing companies money out of my pocket? If you want to stimulate the economy, put some money (more than the piddly tax windfall) in my pocket so I can make ends meet and maybe go out and buy a car.

Throwing money at problems doesn't always solve them.

maxwell

One thing to keep in mind about GM and Ford. Their trucks form the backbone of various services industries and emergency vehicles.

Most ambulances are on Ford F and E series. Most utility company trucks are on Ford and GM platforms. Virtually every response vehicle from the phone company, oil heating company, plumber, electrician etc is a Ford or GM van. If your oil burner konks out in January, you'll appreciate that van pulling up to your house.

These vehicles are vital to our general well being. They are also very reliable, which is why they're used.

If Ford and GM disappear, the US is in a world of hurt for those very necessary trucks.

cory

IT DRIVES ME FREAKING NUTS that you guys think GM FORD AND CHRYSLER ARE AMERICAN CARS...GUYS THEY ARE MEXICAN......IMPORTS..GM alone IMPORTS MORE CARS INTO THE US THAN TOYOTA......

It's like driving a Taco...the only way the BIG THREE WILL EVER BE BIG AGAIN IS TO LEARN FROM TOYOTA AND HONDA..

Thomas

Bail-outs are just a band-aid for weak management and lousy products. No one will buy their inferior products so what's the point. You can thank GM and Chrysler for preventing Universal Healthcare as a few sources inside the Obama administration have already told the WSJ that it would have to be put off for 1-2 years. To think the bail-out would cost 1/4th of what has already been paid-out is a crime! What has that gotten us - NOTHING.

Say Yes to Universal Healthcare and NO to GM!

don't worry. obama will give them healthcare and food stamps and we wait for the solar panel jobs.

Trainer

Nothing stays the same. Let em go now, and we'll get the change that's needed.

alex

im sure this isnt politically correct, but i say it now, let the big 3 file for chapter 11 and go out of business if necessary.

They have mismanaged for years. too many plants, too many workers, not dealing with the UAW, *this is another issue on its own merit*, not making cars that people want, being a one trick ponny, (truck based suvs), keeping too many brands, not being a leader in new technology, not sticking to the core business. (im sorry gm, why are u spending money on the volt when u cant make money on normal cars)?

all this bail out talk is about is pandering to the auto states, that will no doubt pick the nexr president, or re elect one, in 2012. They include, ohio, michigan, indiana, and others.

Trainer

Did someone pull my last comment?

Hybrit

If you believe in capitalism, you must let some or all of the big three fail, if that's what's in the cards. Where's Studebaker today, American Motors, Duesenberg and countless other brands that went out of business? No one was there to help them.

Mike

GM is spending millions of dollars to convince the public and congress to give them billions of tax payer dollars. A GM in CH11 would NEVER have the type of job losses this article indicates.

The fact remains; Chapter 11 is the best alternative to rebuild GM. It would allow them to re-negotiate or void some of their contacts including what the UAW has extorted from GM over the last 30 years. If the Government wanted to help, they could support the DIP financing while giving the pension liabilities to the PBGC.
I hope and pray the congress does not approve throwing billions more at a failing business model. CH11 is a great business tool for situations just like this. Let the free market system work.

Amazing strategy from the three big companies.We might never know how it was done but what important is,how it provide millions of work.This is a great news to help employees keep their job.

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