Life is full of trade-offs. Free trade, Free market vs. Protecting US National Interests?
ANN ARBOR, Mich., Nov. 5, 2008 – Researchers at the Center for Automotive Research (CAR) in Ann Arbor, Michigan, estimate the impact on the U.S. economy would be substantial were all (100%)—or even half (50%) —of the three Detroit-based automotive manufacturers’ U.S. facilities to cease operations. The immediate shock to the economy would be felt well beyond the Detroit Three companies, negatively impacting the U.S. operations of international manufacturers and suppliers as well. Nearly 3 million jobs would be lost in the first year if there is a 100 percent reduction in Detroit Three U.S. operations.
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"The automotive industry has long been, and continues to be, one of the most important sectors in the U.S. economy. The motor vehicle and parts industries employed 732,800 workers directly as of September, 2008, and the Detroit Three employed 239,341 hourly and salary workers in the United States at the end of 2007. The international producers employed roughly 113,000 people in the United States at that time. The auto industry has one of the largest economic multipliers of any sector of the U.S. economy, and is sufficiently large that its growth or contraction can be detected in changes in the U.S. Gross Domestic Product. In many states, employment in automotive and automotive parts manufacturing ranks among the top three manufacturing industries."
Summary
Based on economic modeling by CAR researchers looking at the 50% and 100% reduction scenarios, a full or partial contraction of the Detroit Three would have the following impacts on the U.S. economy:
"The model represents only the impacts resulting from the initial contraction of the Detroit Three within the U.S. economy. It is reasonable to expect that a permanent contraction in the U.S. auto industry would negatively impact the auto industries of Canada and Mexico, since producers in these regions rely heavily upon U.S.-produced parts and components. This interdependency of the NAFTA automotive producers means that the total economic impacts presented here underestimate the full impact of the scenarios. The decline of Detroit Three production in Canada and Mexico would result in further U.S. losses in employment, income, and government revenues. Finally, the bankruptcy of any of the Detroit automakers may have serious implications for their pension funds and the level of obligations of the Pension Benefit Guarantee Corporation, as well as funding of the nation’s health care system. The Detroit Three are directly and indirectly responsible for funding the health care of 2 million employees, retirees, and dependents of their own companies and their suppliers"
