How important are the domestic automakers?

[FoMoJo]

Big 3 woes imperil U.S. economy

Every direct job at an automaker in the United States creates five more jobs, said Sean McAlinden, chief economist and vice president for research for the Center for Automotive Research in Ann Arbor. Two of the five are related to suppliers or dealers; the other three are spinoff jobs at businesses where auto industry workers spend their paychecks.

The next closest industry to autos is high-tech, where each job creates a total of four, including spinoffs, he said. By contrast, one Wall Street position creates a total of about 2.5 jobs, yet Congress expedited aid to the financial services sector this year.

"The cost benefit to the economy (of helping automakers) is better than any individual buyout offered on Wall Street," McAlinden said.

No other industry in America has as broad and significant an impact -- even with the restructuring by Detroit's Big Three automakers in recent years that has closed factories and cost tens of thousands of jobs, McAlinden said.



Some interesting observations if they're true.  It would seem that the overriding problem in the US is a lack of good jobs rather than a lack of credit.  That the government was so forthcoming in bailing out the Wall Street boondoggle yet reluctant to support the auto industry seems a bit unfair.

[TBR]

Every direct job at an automaker in the United States creates five more jobs, said Sean McAlinden, chief economist and vice president for research for the Center for Automotive Research in Ann Arbor. Two of the five are related to suppliers or dealers; the other three are spinoff jobs at businesses where auto industry workers spend their paychecks.

Basically what that says is that a single autoworker spends enough money to pay for the salaries of three workers in local businesses, maybe I am missing something, but how does that make sense?

[FlatBlackCaddy]

They are saying that a community that depends on auto workers has jobs like grocery stores, hardware stores, etc because those(auto workers) have jobs.

To me it's a two sided arguement, since anybody's job can count for someone elses. The industry being discussed is normally the "source" and all other service jobs are the result of it.

It can just as easily be said that the store owner, the construction worker or the lawyer is the one "creating" the autoworkers job. Since they buy cars the create the need for the car company to produce cars.

[FlatBlackCaddy]

Basically what that says is that a single autoworker spends enough money to pay for the salaries of three workers in local businesses, maybe I am missing something, but how does that make sense?

It does and it doesn't.

If the auto worker wasn't there the stores wouldn't have anyone to sell to is what they are trying to say, which is BS.

[sportyaccordy]

Drawing at straws. Let them crumble, and re-emerge from the rubble w/o the UAW albatross

[GoCougs]

Uh, there is no lack of good jobs in the US. Stroll the halls of your local hospital, or Microsoft, Boeing, or Intel and you'll see at least 30%+ foreign-born employees. There are literally millions of well-paying, high-tech jobs that US corporations can't fill because there aren't enough Americans who have the education and training.

The premise for bailing out banks and the like was that the capitals markets underpin a capitalist economy. Detroit does not underpin anything of the sort. Some could argue that without Detroit, a lot of those vehicles will still have to made in the US for various reasons, and Americans will still have to staff those plants. Others could argue that without Detroit, existing automakers would enjoy radically increased demand, and higher profit margins as a result, leaving little impetus to buy Detroit.

I tend toward the latter - automakers capable of stepping up have no impetus to do so. They are already very successful financially, so why bother with billions $$$ in ridiculous retiree costs, and doing battle with the UAW?  All in all, Detroit has shown that it no longer deserves to exist. If it does take such a toll on the economy, that is the market's fault for being wed in such a manner. It will serve as a lesson learned, and after a time of adjustment society as as whole will be better off. 

As with past US industries that have come and gone for various reasons; textiles, steel, etc., people will have to figure it out for themselves - a lot of which will be moving to where the new jobs are at or otherwise preparing for/finding work in other industries.

[FoMoJo]

Basically what that says is that a single autoworker spends enough money to pay for the salaries of three workers in local businesses, maybe I am missing something, but how does that make sense?

The Beer Store, the Liquor Store and McDonalds?

[Byteme]

It does and it doesn't.

If the auto worker wasn't there the stores wouldn't have anyone to sell to is what they are trying to say, which is BS.

No, what they are saying is that the the stores won't sell as much which would lead to the stores needing elss employees, which means those employees in turn reduce their demand, which further reduces the number of emplyyees needed.

Also consider that since the store wouldn't be selling as much they wouldn't be buying as much from their suppliers which in turn would cause them to reduce their empoyees and need less raw materials, etc. 

Look at what happened when GM closed plants in Michigan in the 80's, as chronicled in "Roger and Me".  Suppliers close their doors which cause other stores to reduce staff or close, which causes other stores or suppliers to close or reduce output. 

[FoMoJo]

Uh, there is no lack of good jobs in the US. Stroll the halls of your local hospital, or Microsoft, Boeing, or Intel and you'll see at least 30%+ foreign-born employees. There are literally millions of well-paying, high-tech jobs that US corporations can't fill because there aren't enough Americans who have the education and training.

It doesn't take much education to work for an automaker on the assembly line.  Education is key, of course, to elevating job opportunity but it will take much longer to cure that problem.   In the meantime, the automakers provide reasonably paid jobs to semi unskilled labourers.

The premise for bailing out banks and the like was that the capitals markets underpin a capitalist economy.

Does this mean that capitalism cannot exist on its own without the occasional government bailout? 

Detroit does not underpin anything of the sort. Some could argue that without Detroit, a lot of those vehicles will still have to made in the US for various reasons, and Americans will still have to staff those plants. Others could argue that without Detroit, existing automakers would enjoy radically increased demand, and higher profit margins as a result, leaving little impetus to buy Detroit.

The automakers and like industries underpin a goodly portion of the job market.  This, of course, includes foreign automakers who have plants in the US. 

I tend toward the latter - automakers capable of stepping up have no impetus to do so. They are already very successful financially, so why bother with billions $$$ in ridiculous retiree costs, and doing battle with the UAW?  All in all, Detroit has shown that it no longer deserves to exist. If it does take such a toll on the economy, that is the market's fault for being wed in such a manner. It will serve as a lesson learned, and after a time of adjustment society as as whole will be better off. 

If you do not have the means to manufacture at home, after a time you will pay dearly for it.

As with past US industries that have come and gone for various reasons; textiles, steel, etc., people will have to figure it out for themselves - a lot of which will be moving to where the new jobs are at or otherwise preparing for/finding work in other industries.

Once these industries have gone elsewhere, the only recourse is to develop new industries and retain the manufacturing base at home; as a lesson learned.  You cannot compete with emerging nations on labour costs without some prop unless the cost of labour at home has fallen to the level of a 3rd world country.  By then, your entire economy will have collapsed.

[TBR]

The Beer Store, the Liquor Store and McDonalds?

So a typical GM employee spends $25-30k per year on liquor, 25-30k on beer, and 20-25k on fast food every year? Don't think so.

[TBR]

No, what they are saying is that the the stores won't sell as much which would lead to the stores needing elss employees, which means those employees in turn reduce their demand, which further reduces the number of emplyyees needed.

Also consider that since the store wouldn't be selling as much they wouldn't be buying as much from their suppliers which in turn would cause them to reduce their empoyees and need less raw materials, etc. 

Look at what happened when GM closed plants in Michigan in the 80's, as chronicled in "Roger and Me".  Suppliers close their doors which cause other stores to reduce staff or close, which causes other stores or suppliers to close or reduce output. 

If that's really how it works why would the creation of an autoworker job create more jobs than a Wall Street job?  Wall Streeters are going to be spend significantly more money in a more broad range of locale.

[GoCougs]

It doesn't take much education to work for an automaker on the assembly line.  Education is key, of course, to elevating job opportunity but it will take much longer to cure that problem.   In the meantime, the automakers provide reasonably paid jobs to semi unskilled labourers.

The "cure" is up to the individual. Anyone with a pulse that works in an industry remotely linked to Detroit has seen the impending implosion for at least five years. They ain' t prepared for the inevitable that's their problem. They chose their path, and deserve the consequences.

Does this mean that capitalism cannot exist on its own without the occasional government bailout? 

No.

The automakers and like industries underpin a goodly portion of the job market.  This, of course, includes foreign automakers who have plants in the US. 

A portion - "goodly" is overstating it. No matter what, Americans will buy lots of cars every years; if Detroit goes away, someone else will make them; likely states-side.

If you do not have the means to manufacture at home, after a time you will pay dearly for it.

Not at all. There is very little knowledge gained in manufacturing cars, consumer electronics, clothes and the like. Dishing that off to developing labor pools is the superior knowledge and value tack. The power is in the design and resource management, not the manufacture of inconsequentials.

Once these industries have gone elsewhere, the only recourse is to develop new industries and retain the manufacturing base at home; as a lesson learned.  You cannot compete with emerging nations on labour costs without some prop unless the cost of labour at home has fallen to the level of a 3rd world country.  By then, your entire economy will have collapsed.

The only recourse is to let the market figure it out. No one is charged with developing new industries nor retaining a manufacturing base. Governmental interference and its proxy that is unionization, has actually sped away manufacturing jobs and industries.

The US can't compete on labor and it will never want to; and why the US leads the world in automation technologies. Corporations' largest expense is payroll, and they'll pay dearly to slash it as much as possible; government making labor that much more expensive will only speed the process.

At the end of the day, capitalists will ALWAYS win. People will be best off if they simply acknowledge this fact and buck up.

[Byteme]

If that's really how it works why would the creation of an autoworker job create more jobs than a Wall Street job?  Wall Streeters are going to be spend significantly more money in a more broad range of locale.

Didn't say they wouldn't. 

However an auto manufacturer cutting back on production is likely to casue more negative impact since the automaker's maunfacturing supplier will also then be foirced to cut back production and lay off workers.  A banker or broker cuts back and there is not as much negative effect on his suppliers.

[Byteme]

The only recourse is to let the market figure it out. No one is charged with developing new industries nor retaining a manufacturing base. Governmental interference and its proxy that is unionization, has actually sped away manufacturing jobs and industries.

That assumes, of course, that the market solution is the solution most desired by society.  That often isn't the case.

[FoMoJo]

The "cure" is up to the individual. Anyone with a pulse that works in an industry remotely linked to Detroit has seen the impending implosion for at least five years. They ain' t prepared for the inevitable that's their problem. They chose their path, and deserve the consequences.

No.

A portion - "goodly" is overstating it. No matter what, Americans will buy lots of cars every years; if Detroit goes away, someone else will make them; likely states-side.

Not at all. There is very little knowledge gained in manufacturing cars, consumer electronics, clothes and the like. Dishing that off to developing labor pools is the superior knowledge and value tack. The power is in the design and resource management, not the manufacture of inconsequentials.

The only recourse is to let the market figure it out. No one is charged with developing new industries nor retaining a manufacturing base. Governmental interference and its proxy that is unionization, has actually sped away manufacturing jobs and industries.

The US can't compete on labor and it will never want to; and why the US leads the world in automation technologies. Corporations' largest expense is payroll, and they'll pay dearly to slash it as much as possible; government making labor that much more expensive will only speed the process.

At the end of the day, capitalists will ALWAYS win. People will be best off if they simply acknowledge this fact and buck up.

Certainly, ownership of property is a critical factor in capitalism.  That the definition of property has and will take a broader form, influences the working of capitalism.  Capitalism, as well, is not the roulette game that has been played on Wall Street, and elsewhere, lately.  Capitalism will only win when accountability is a factor as well as a means of keeping wealth from pooling and, thereby, stagnating the lifeblood of the system.  Capitalism stops working when the wealth is in too few hands.

It is a fact that not all can manage capital.  It is a fact that not all care that much about capital; even when they have an abundance at their disposal yet are loath to convert it into sustenance.  Obversely, some care only about the accummulation of capital far beyond any reasonable requirement.  As stated elsewhere, there needs a balance in order for society to agreeably function whether at a local, national or on a global basis.  A free market economy is key to any fair society but so is disposal and distribution of wealth. 

[traumadog]

... Some could argue that without Detroit, a lot of those vehicles will still have to made in the US for various reasons, and Americans will still have to staff those plants. Others could argue that without Detroit, existing automakers would enjoy radically increased demand, and higher profit margins as a result, leaving little impetus to buy Detroit.

And there's the rub - without the Big 3 in existence, the supplier chain will also be heavily strained.  That means that the transplant factories will most likely not be able to source parts domestically because the suppliers (who already have thin margins) would be out of business, too.

Therefore, any existing demand for automobiles in the US market would have to be supplied by imported vehicles/parts - something that would slow dramatically as the US market implodes from a lack of jobs to buy said cars.

And what I said applies to outside of Detroit, as the thousands of people working in parts, distribution, dealers, design bureaus, ad companies, etc. housed outside of Michigan will all feel the pinch.

[MrH]

All I'll say is this:

The decline of truck sales and SUV's has hurt our business.  Our automotive department can't find any big contracts.

[Lebowski]

Not very important at all.

Every time a thread about GM going bankrupt comes up, someone invariably posts about how "disastrous" it would be for the US economy.  Nope.

The Big 3 do not create jobs.  What creates jobs is consumers' demand for cars.  As long as US consumers demand say, 15 million cars and light trucks a year, the market will make sure those cars get built.  If not by the Big 3, than by their competitors, which are increasingly building plants in the US to serve the US market.

GM and Chrysler are uncompetitive turds, and by staying in business via gov't bailout or other ST solution all they're doing is delaying the inevitable.  They need to go bankrupt so someone who knows how to run a profitable business can take their place and build those cars, and the US economy will be stronger, not weaker, as a result.

[Lebowski]

Look at what happened when GM closed plants in Michigan in the 80's, as chronicled in "Roger and Me". 

Ha - Michael Moore's "Roger and Me", yeah that's an unbiased viewpoint.

Yes, when a competitive turd goes out of business the local economy suffers.  What Roger & me didn't include was all the plants being built in SC or TX, plants that are actually competitive, that create jobs in those regions and support jobs there.

[Danish]

Uh, there is no lack of good jobs in the US. Stroll the halls of your local hospital, or Microsoft, Boeing, or Intel and you'll see at least 30%+ foreign-born employees. There are literally millions of well-paying, high-tech jobs that US corporations can't fill because there aren't enough Americans who have the education and training.

Why can't foreign born workers who come to the States and get educated be Americans?

[traumadog]

Ha - Michael Moore's "Roger and Me", yeah that's an unbiased viewpoint.

Yes, when a competitive turd goes out of business the local economy suffers.  What Roger & me didn't include was all the plants being built in SC or TX, plants that are actually competitive, that create jobs in those regions and support jobs there.

Yet those jobs created in the South haven't really offset those lost in the North.  Toyota's 30-odd thousand jobs in North America haven't replaced the several hundred thousand lost by the Big 3.  And mind you, the same environment that's twisting the death spiral for GM/Chrysler/Ford now is doing the same to Toyota (hence the brand-new Tundra factory's extended holiday vacation).

Ad like I mentioned above, the local transplants still rely on local suppliers for many of their parts.  Those suppliers don't have a huge margin, and if they lose a good chunk of their contracts, I'd bet they'd fold too.  And I'm not sure Toyota/Honda/Nissan is in any shape to buy out all those domestic suppliers (or even any of the Big 3's empty factories) right now most of them have been running flat (Toyota has been barely break-even for the past quarter or so, Honda/Nissan are also struggling) - so their answer would be to supply the USDM by imports.

And mind you, it took decades in the USDM for Toyota to have any meaningful plants here. Hyundai was here for almost two decades before their first plant, and they're considered to be Toyota's biggest potential competitor now.

So yes, the loss of the Big 3 WOULD definitely be a hit to the US economy as a whole, something that would probably take years (or decades) to recover from. 

[MrH]

Not very important at all.

Every time a thread about GM going bankrupt comes up, someone invariably posts about how "disastrous" it would be for the US economy.  Nope.

The Big 3 do not create jobs.  What creates jobs is consumers' demand for cars.  As long as US consumers demand say, 15 million cars and light trucks a year, the market will make sure those cars get built.  If not by the Big 3, than by their competitors, which are increasingly building plants in the US to serve the US market.

GM and Chrysler are uncompetitive turds, and by staying in business via gov't bailout or other ST solution all they're doing is delaying the inevitable.  They need to go bankrupt so someone who knows how to run a profitable business can take their place and build those cars, and the US economy will be stronger, not weaker, as a result.

The problem is, most foreign car makers don't use US suppliers for their cars.  GM and Chrysler pretty much source mostly from the US.  All of our big automotive contracts were with the big three.  I don't think we've ever been a supplier to a foreign automotive company.

[traumadog]

The problem is, most foreign car makers don't use US suppliers for their cars.  GM and Chrysler pretty much source mostly from the US.  All of our big automotive contracts were with the big three.  I don't think we've ever been a supplier to a foreign automotive company.

Which is odd, as I see high "North American Content" numbers on Camrys, etc...

[TBR]

Didn't say they wouldn't. 

However an auto manufacturer cutting back on production is likely to casue more negative impact since the automaker's maunfacturing supplier will also then be foirced to cut back production and lay off workers.  A banker or broker cuts back and there is not as much negative effect on his suppliers.

There is certainly a negative effect on contractors and their suppliers (the stock price for the company my dad works for, a building products company, is down 90% right now).

Referring back to the original article:

very direct job at an automaker in the United States creates five more jobs, said Sean McAlinden, chief economist and vice president for research for the Center for Automotive Research in Ann Arbor. Two of the five are related to suppliers or dealers; the other three are spinoff jobs at businesses where auto industry workers spend their paychecks.

The next closest industry to autos is high-tech, where each job creates a total of four, including spinoffs, he said. By contrast, one Wall Street position creates a total of about 2.5 jobs, yet Congress expedited aid to the financial services sector this year.

Even if the only jobs created by a "Wall Street position" are spin off jobs the article still says that an automaker job creates more of those spin off jobs. That's why I question the validity of this article.

[MrH]

Which is odd, as I see high "North American Content" numbers on Camrys, etc...

That may be true.  I'm just speaking from my experience in it.  We've never seen a foreign car maker contract to my knowledge.

[GoCougs]

Why can't foreign born workers who come to the States and get educated be Americans?

Don't know.

[Byteme]

Ha - Michael Moore's "Roger and Me", yeah that's an unbiased viewpoint.

Yes, when a competitive turd goes out of business the local economy suffers.  What Roger & me didn't include was all the plants being built in SC or TX, plants that are actually competitive, that create jobs in those regions and support jobs there.

Of course Moore is biased.  That doesn't alter the fact that what he was reporting was a very real problem brought about by the closure of those automotive plants.

Assume you mean the now idled Toyoto Truck plant in the San Antonio area?  That plant wasn't even on the drawing borads when Roger and Me was made.

[Byteme]

Referring back to the original article:
Even if the only jobs created by a "Wall Street position" are spin off jobs the article still says that an automaker job creates more of those spin off jobs. That's why I question the validity of this article.

The difference is the automaker is in the manufacturing sector and the wall street firm is in the service sector.

If the auto manufacturer cuts jobs its because the manufacturer is making less cars.  So if the manufacturer cuts 1,000 jobs those workers going to have less money to spend. The auto manufacturer is also going to be buying less sub assemblies and raw materials from its suppliers.  This in turn will cause the manufacturer's suppliers to lay off workers.

If the bank lays off 1,000 workers those workers will have less to spend, but the impact to the banks suppliers is minimal.  There are no significant reductions in what the bank buys for it's daily operations, at least no reductions comparable to those that would take place at the auto manufacturer.
r

[SagRacer]

I think one of the main points that is being missed here is that IF GM and Ford can make it to 2010, that is when the healthcare liabilities to the UAW gets transferred to VEBA.  They can also hire in people at $14 per hour instead of the mandatory $28 per hour now.  This will save them billions of dollars per year and help narrow the huge inefficiency gap caused by the UAW.

[Byteme]

I think one of the main points that is being missed here is that IF GM and Ford can make it to 2010, that is when the healthcare liabilities to the UAW gets transferred to VEBA.  They can also hire in people at $14 per hour instead of the mandatory $28 per hour now.  This will save them billions of dollars per year and help narrow the huge inefficiency gap caused by the UAW.

Good point.