Millions of jobs at stake in carmaker woes

The downfall of one of the Big Three could cost as many as 3 million jobs and $60 billion in the first year, report says.

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By Jessica Dickler, CNNMoney.com staff writer

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NEW YORK (CNNMoney.com) -- With auto sales at the weakest pace in 25 years and a government bailout far from certain, job losses in the struggling industry could potentially get much worse.

If the Big Three carmakers were to cut U.S. operations by 50%, 2.5 million jobs could be lost in 2009, according to a study released Wednesday.

The Center for Automotive Research reported that the total employment impact includes nearly 250,000 jobs lost at the automakers and nearly 800,000 at suppliers.
In addition, the organization estimates another 1.4 million job losses outside the industry, such as those caused when stores go out of business in communities hit by plant closings.

In economic terms, cutting operations in half would reduce personal income by more than $125.1 billion in the first year, and $275.7 billion over three years, the center said. Such a decline in personal income would cost the government tax dollars -- $49.9 billion in 2009 and more than $108.1 billion over three years.

Automakers GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler employ hundreds of thousands of well-paid workers and support far more retirees and their families with health care and other benefits. In addition, dozens of suppliers and thousands of dealerships depend on the Big Three.

"The likelihood of one or two of the Detroit Three manufacturers ending operations is very real," David Cole, chairman of the center, said in a statement.

But a larger fear is a complete shutdown. A 100% reduction in Big Three operations would cost about 3 million jobs in the first year alone.

"A complete shutdown of Detroit Three U.S. production would have a major impact on the U.S. economy in terms of lost wages, reductions in social security receipts, personal income taxes paid, and an increase in transfer payments," Sean McAlinden, the center's chief economist, said in a statement. "The government stands to lose on the level of $60 billion in the first year alone, and the three year total is well over $156 billion."

Year to date, the auto industry has announced 110,610 job cuts, more than double than the same period in the year before, and the highest of any industry with the exception of finance, according to a report released Wednesday by global outplacement firm Challenger, Gray & Christmas.

More than 15,000 layoffs were announced in the automotive industry in October alone, the report said. To top of page

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