EPI: If Big 3 Fail 18% Unemployment in Michigan

The Economic Policy Institute has a new report out today about the economic impact of an auto industry collapse. A previous report by the Center for Automotive Research (CAR)estimated that a total collapse of the big 3 would result in the loss of almost 3 million jobs, and $554.6 billion(4% of US GDP) in economic losses. What was missing was a state by state breakout. I've mocked up the state by state job losses consequences of a GM only collapse, and what would happen if the big 3 all failed.



The employment consequences of even a GM collapse would be drastic. 914,000 jobs would be lost nationally increasing the unemployment rate by 0.7% from 6.4% to 7.1% the highest since 1993. A total shutdown would result in the loss of 3.3 million jobs increasing the unemployment rate by 2.5% to 8.9%, the highest since 1983.

More bothersome, is that the job losses will be concentrated in a handle of states. The top 6 auto industry states (Michigan, Indiana, Ohio, Kentucky, Tennessee, and Alabama) stand to lose almost 285,000 jobs in the event of a GM shutdown. If all three fail, these same states would lost over a million jobs.

If all 3 shutdown unemployment in Michigan would rise to 18.2 %. In Indiana 11.4%, in Ohio 11.3%, in Kentucky and Tennessee 11% and in Alabama 9.6%.

If the auto industry collapses, the direct loses in the auto sector will push unemployment up to levels not seen since the early 1980s. I suspect that economic impact will be much larger though, because these jobs are the backbone of the middle class in the auto states. Kill off the middle class supported by manufacturing, and suddenly people employed in stores, banks, and the professional service sector begin to lose their jobs.

Office spreadsheet icon auto industry.xls34.5 KB



a picture is worth 1000 words

I wrote a post earlier Give Them the Money and this is so important, I cross posted a few blogs on EP over on a few major blogs (which I suggest others do because this is so critical).

Honestly it's better to just plain give them the money now and sort out conditions later then risk the above.

Look at that red, it looks like a disaster of incredible proportions.

Good post middle and in light of what AIG did today it's incredible, just incredible that the AIG story isn't on the cable blast 24/7 talking heads lips today and instead the auto industry is.

As Sen Tester

pointed out today. The irony of the earlier financial bailout is that it was supposed to inject capital into the system so that GM and the others could get loans. But the banks aren't lending. And that's the reason why GM and the rest are circling the drain.


another good question was to ensure this money is only put in the big three domestic and not in some offshore plant or subsidiary.

Right now they are talking about nationalization, I don't trust this government to manage anything but I could see preferred shares, voting shares, profit sharing for the unions and other types of incentives.

Who's talking about




Roubini is really talking structured bankruptcy, which I question for the big three have very unfair trade terms currently.

Over on Open Left is a quick hit on a list of economists, with links.

Little to be said here....

..AIG continues to loot the Treasury with no result while 'SellOut' Reid, the lousiest leader of the Senate in over a century sez of the Auto re-finance, 'The votes are not there...'

Let their Calvinist God help these viles scum if ever the sheeple realize what is going on here.

Looks to me like the entire government needs the 'rope treatment'.

'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'

Harry Reid

I have to agree, and even worse, they are frothing at the mouth at passing....their corporate ridden, hated by most of America comprehensive immigration agenda. Look at the crap going on, the unemployment rate and that is their guest worker, labor arbitrage ridden focus. Just unreal, I wish the Progressive/Populist wing would get some real power.

The bailout is all going OFFSHORE

I watched the entire 6 hours tonight.

Twice there were direct questions asked if the bailout money was all going to be spent in the US.

Twice GM (Waggoner) said he would have to come back later with an answer.

Twice Ford (Mullaly) said the batteries would be made in America. Period.

Twice Chrysler (Nardelli) said that 60% of its business is in America. Period.

Pensions, pensions, pensions, UAW, UAW, UAW, labor, labor, labor, transplant, transplant, transplant, $14/hr, $14/hr, $14/hr.

This circus (Senate) is very clear to me.

Who wants to invest in my Guillotine company?

The first one off the line will be set up on the steps of the Senate building. The first 10 investors of $10,000 will get round-trip airfare to watch a head of cabbage bounce down the capitol steps.

not so

I caught it too and very specifically Waggoner said no, this money would not fund anything offshore.

Now I agree that offshore outsourcing should be tied in but we also need major trade reforms but you cannot forget the emergency aspect of this and if they get the money, absolutely not should this be the end of it.

While we want that stopped, please realize the current US jobs and small businesses this would affect. Don't kill the baby because you hate the bathwater.

But if the baby is about to die anyway

Then maybe it is time to actually replace the bathwater instead of just filtering it.


Maximum jobs, not maximum profits.


is an economic tsunami as pointed out by EPI and that's why they should plain get the money and additional conditions, including trade agreement modifications should be made. There is no way you can quickly get trade treaty modifications and also have to wait for the new administration to even have a prayers chance.

I was hoping the link to David Suzuki's article made my point

Which was- at the rate we're going, we're not going to see that make any change other than to delay the inevitable.

Or as David Suzuki put it in that article:
"The economy is not a force of nature, some kind of immutable, infallible entity. We created it, and when cracks appear, it makes no sense to simply shovel on more money to keep it going. Because it’s a human invention, an economy is something we should be able to fix – but if we can’t, we should toss it out and replace it with something better."

I agree with you that we should delay the inevitable to give the new admin a prayer's chance, but the new admin should *also* be looking at worst case contingencies of having to completely re-engineer the economy to survive.

We COULD quickly get trade treaty modifications with a 90-day ban on imports and exports, scaring the world silly with the idea of cutting off America's consumers from Chinese factories and giving third world farmers a reason to actually plant this spring as they would need to actually rely on their own internal food sources for once.

We COULD quickly nationalize the big three automakers, then retool to produce generator trailers & Michelin Active Wheel drive trains/batteries on all the current body models, which would double or triple fuel efficiency in under three months, while keeping people employed. I guarantee you that in America's market at least, a 80MPG Hummer will beat a 50 mpg Prius, and the technology to do so is as simple as replacing 10 parts in the existing assembly line.

We COULD start a national WPA/CCC like program to suck up a million or so unemployed people to give government-sponsored "ambient energy footprint" renovation to every building owner in the country over the next 50 years, thus eliminating the energy crisis once and for all and making America energy self-sufficient, the technology already exists.

We COULD start in today on infrastructure repair and rebuilding- especially bridges, tunnels, and rail- that we need to move our transportation system into the 21st century.

We COULD pay for all this by printing new money instead of borrowing against future tax earnings, thus creating hyperinflation to fight the deflationary cycle.

There is plenty we COULD be doing, if we were willing to throw out 19th century theories of economics that haven't worked for the past 40 years anyway and no longer match reality.

And none of it *really* has to wait for a new administration, if it wasn't for the religion of the old administration worshiping at the altar of mammon instead of putting people before pennies. My real fear, though, is that the new administration also worships at the altar of mammon, and puts pennies before people.

Maximum jobs, not maximum profits.

Not So; So

Regarding Wagoner's response to GM spending the bailout money in America, Wagoner was very careful to say that the bailout money would not go to Mexico. As to the question from Senator Tester whether plant expansion in Mexico was under way or planned, Wagoner said he didn't know and would have to come back later with that information. Hold your breath for that answer.

three-quaters of the way through the video

It doesn't matter if the money comes straight out of the bailout money account or proceeds from other GM funds, overseas expansion is continuing and will continue. The US taxpayer is bailing out failed auto-maker policies in the US to free up GM capitalization funds for foreign investment. The other two CEOs responded with the same cagey lyrics about offshoring. Only two senators in the entire 6-hour session asked about offshoring. They did not press for concise answers. They allowed mumbo-jumbo answers.

My point is that "Free Trade" globalization is what is destroying the US auto industry, and nearly every other industry. Planned obsolescence and market saturation in the US is also a major problem for autos. Their testimony about merger talks and consolidation would be a megadisaster.

What needs to be done is trade protectionism, break-up of GM and Chrysler into dozens of hybrid auto start-ups to compete for market share. Ford will have to follow suit or collapse. Ford doesn't need Fed money and stated so. Auto workers must be guaranteed jobs. There is a Main Street problem, too, you know.

yes so, no so

;) He later said no and they were significantly questioned in the House Committee where they said no....

now that said I strongly think to get any US taxpayer money Congress should be tying it exclusively to US investment and US citizen/perm resident workers only. Put it in writing, put it in law because who do we know who has not gone before Congress and lied their head off (ahem, Bill Gates)....

Also, Citigroup signed a $2B outsourcing deal while firing 53,000 people where they said globally but I'll bet most of those fires were US workers.

So, instead of analyzing the clips and written transcripts what we need is enacted into law that taxpayer money will be used to stimulate the U.S. economy, go to the US worker exclusively.

I wrote this post talking about US taxpayer money generally for stimulus and bail outs and having US taxpayer money simply be funneled offshore is a real major problem.

We need to demand lawmakers finally get serious and put limitations on certain activities, like US taxpayer money, be kept circulating within the U.S.

A MI fantasy is that the domestic autos

Everyone sure is excited about 'loaning' $30 to 40 Billlion to..

...The Big Three. Hmmmm....reminds me of something...what was that?



How much have these crooks recieved by our legislators only too, too happy to 'prop up' an industry that produces few jobs and no 'real' product?

A fuck of a lot more thn $30 Billion and no one on The Hill says 'boo'.

The stink of the corruption in Congress is appalling.

'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'

I forgot....

....AIG doubles salaries according to another post here by instapopulist. Nice work Pelosi.

'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'

Economic impact

Lots of industries today are becoming unprofitable because of this economic recession that results to financial crisis. Economic impact keeps on continuing. It's hard for us to forget that the economy situation is hurting everyone. Recessions and then depressions are typically global in nature (at least in capitalist countries). Layoffs are occurring in other nations such as Japan, Germany, and the UK are being hard hit. President Obama is promising investment in infrastructure and creating jobs – we hope so. The middle class should return to prominence so they don't have to take out as many payday loans.