Big Three bankruptcy impact distorted

Last week at the 2008 Inforum Outlook Conference, a presentation was given about the impact of potential bankruptcy filings of the Big Three automakers, GM, Ford, and Chrysler. The media has cited figures ranging from 2 million to 3 million jobs lost.

A study of such bankruptcy filings found that the figure of 3 million jobs is grossly inflated. The logic is simple: 3 million jobs would only be lost if all  supply and manufacturing related to Big Three autos was halted completely, and that’s not going to happen.

First, the bankruptcies would likely be Chapter 11, in which the companies are seeking to reorganize. That means they keep operating while they work out a plan with creditors to continue in business and pay off their debts. So there would be some level of production still happening.

But even if the Big Three shut down completely, all 3 million jobs will not be lost. There is significant demand for automobiles in the United States, and some of that demand has been fulfilled by the Big Three. Another automaker will have to fill that demand if the Big Three are gone, and that will require hiring more people and sourcing additional materials and parts.

So the bottom line is that constantly referring to the loss of 3 million jobs is dishonest. It’s likely a scare tactic used to try to gain support from main street America for an auto bailout. Don’t fall for it.

3 thoughts on “Big Three bankruptcy impact distorted”

  1. I also heard on FoxNews that the totals cited by the Big 3 included jobs in related businesses such as car washes, etc. How is someone at a car wash going to lose their job because GM is not making cars? That is ridiculous. They are still going to have to wash the Toyota that takes its place. It is also a farce to keep calling Toyota a foreign manufacturer when a good deal of their assembly plants are right here in the US. Sure, they are not in the liberal union dominated parts of the US, but they are still in the US.

  2. Good point – they did the same thing in Canada. If the big 3 “shut down completely” then there will be xxx jobs lost which of course includes everybody who has anything to do with cars.

Leave a Reply