If bankruptcy shuttered one or more U.S. automakers, the effect would be the loss of up to 3.3 million jobs in the U.S. within the next year, according to a study released today by the Economic Policy Institute (EPI).
“It is in the national interest to invest in a bridge loan now, rather than pay the consequences of bankruptcy for one or more domestic automakers,” said EPI Economist Robert Scott, and author of the paper, When Giants Fall. “It’s an investment, and the government is likely to get its money back with interest, and maybe even a profit.”
If these giants fall, they would take down more than auto worker jobs. When the wages from those auto sector jobs dry up, an additional 576,700 to 2.1 million “re-spending” jobs would be lost, says EPI. These are jobs that would have been supported by the spending of auto and related workers. Tax losses and increased government payments would exceed $150 billion in the first three years following bankruptcy of all three domestic auto companies. Without cars to export, the U.S. trade deficit would rise by $109.3 billion.
“The domestic automakers don’t have the same bankruptcy and restructuring options as the airline industry does,” explained Scott. “Customers are unwilling to purchase a vehicle from a company that might not be able to offer a warranty or repairs.”
A separate report from The Engine of Democracy, a coalition of auto suppliers, dealers and others, says the number of jobs at risk is closer to six million.
"With six million supplier, dealer and related jobs at risk nationwide, failure of the domestic auto industry is not an option," said coalition member Timothy Leuliette, president and CEO of Dura Automotive Systems, at a rally this week in Washington, D.C. "In addition to the ‘Big Three’ auto companies, countless supporting companies drive good jobs in local economies all across the nation. These are hard working men and women struggling to support their families and communities in the midst of this global economic crisis. Congress must act now to support a bridge loan – not a bailout – for America’s auto industry."
