If a Detroit Automaker Fails, Job Losses in the Millions Could Spread to Many Other Sectors

The word on the street is that GM may run out of cash by the end of December. Also, rumors have circled that Chrysler will probably be sold in pieces.

But if any of Detroit’s Big Three automakers fail, the fallout could be huge. Millions of jobs could be gone as a result of even one of the automakers not succeeding in 2009, reports the Wall Street Journal.
Not only would employees of the automakers lose their jobs, but a ripple effect would cause workers in industries not even related to the automotive industry to become unemployed as well. According to a report from the Center for Automotive Research, within a year’s time, about 2.5 million jobs throughout the U.S. would likely be cut if just one of the Detroit’s Big Three goes under in 2009.
An estimated 1.4 million jobs lost would be blue and white collar positions at restaurants, real estate firms, public schools and more. The Detroit area’s economy would likely be hit the hardest and quickest, says Greg Saltzman, a labor researcher at the University of Michigan and professor of economics and management at Albion College in Albion, Mich.
"There would be a regional macroeconomic impact," he says.  "If you were working in a haircutting salon in southeastern Michigan, you would find fewer customers. It would affect public employees… because tax revenue would go down. Teachers would find there’s less government tax revenue to support the public schools."
In some Midwest cities, GM, for example, is the only major employer. So if GM were to fail, some entire cities could be devastated by the impact. Jobs would be gone, people would move elsewhere and the city’s economy would be hit hard.
Parts suppliers, material suppliers and dealerships would all be in jeopardy of shutting down if one of the manufacturers were to fail.
"It would tip Michigan into a depression and it would aggravate the recession for the rest of the country," Saltzman says.