Wednesday, November 19, 2008

The Auto Bailout Debate Continues

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I'd heard that "10% of all jobs in America are tied to the auto industry."

It seemed high to me. But I wasn't sure, so I did some research.

Knowledge is power, so I'm sharing...

My first question was: how many jobs are there in the United States? It's hard to tell because of the way things are calculated. (I'll save that for another post and give you the Clif Notes version). There were slightly more than 174,249,000 jobs in America in 2005. The oft-quoted job loss number is about 3 million, which by my math, is more like 1.7%. Don't get me wrong, the raw numbers are terrifying, but it's nowhere near 10%.

My next question was about supply chain affects. One factoid that interested me was in the USA Today (18 November, page 2A). Toyota says:

We are concerned with the industry in general, but we're mostly concerned about our suppliers. If the worse happens in Detroit and these companies suffer, we're worried about their longevity as well.
I know a little bit about manufacturing, and certainly understand the problems involved in re-tooling from, say, giant pick-up trucks with gasoline engines to small cars powered by plug-in electric batteries. But a lot of the parts that suppliers manufacture (windshields, air filters, tires, you know, the easily identifiable parts) are already produced in multiple configurations without much trouble. It seems that if the demand for autos exists, the parts suppliers can easily make, say, 21" windshield wiper blades as easily as they can make 24" windshield wiper blades.

Then, I was curious about how dependent the economy is on indirect contributions. It appears that they include jobs dependent on CARS, not domestic cars. Included are things like taxi cabs, car washes, tire and muffler stores, etc. Those jobs don't go away: rather they are dependent on the total number of automobiles from any source.

The most recent report comes from the Center for Automotive Research. They ran two models on the failure of Detroit: 100% failure, or 50% failure.

Their conclusions:

Total Impacts after 3 years:

100% loss:
Personal Income ($ billions) -398.2
Combined loss of tax receipts and increase in transfer payments ($ billions) -156.4

50% loss:
Personal Income ($ billions) -275.7
Combined loss of tax receipts and increase in transfer payments ($ billions) -108.1

Can someone explain to me how an infusion of the $25 billion the Big Three are looking for affects those numbers? Are any of you planning on buying a car in the next several months? Is anyone you know? And if no one is buying a new car, how do we save auto manufacturing?