Center for Automotive Research (CAR) Outlines Impact of Failure of US Automotive Industry

Ann Arbor MI (Nov 4, 2008) - The Center for Automotive Research (CAR Group) published a comprehensive report entitled "The Impact on the U.S. Economy of a Major Contraction of the Detroit Three Automakers to provide insight into the projected ramifications of a potential bankruptcy of General Motors (GM) or other major US-based OEMs (carmakers) following a crisis that has stemmed from recent crisis in the US financial sector.

Part of the introduction to the report:

The auto industry has one of the largest economic multipliers of any sector of the U.S. economy, and is sufficiently large that its growth or contraction can be detected in changes in the U.S. Gross Domestic Product. In many states, employment in automotive and automotive parts manufacturing ranks among the top three manufacturing industries. The purpose of this memo is to estimate the economic impact-in terms of jobs, compensation and tax revenues-of a major contraction involving one or more of the Detroit Three automakers.

Prepared by the subject matter experts with years of experience in the automotive industry at the research group, the report was accompanied by a press release that summarized the impact to the US Economy:

"Our model estimates that 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. (break)

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."

And the CAR chairman, Dr. David Cole:

"To permit any of the Detroit Three manufacturers to collapse, would scar the U.S. economy further at a time when it can ill afford another blow. (break)

The likelihood of one or two of the Detroit Three manufacturers ending operations is very real. As policymakers consider their positions on assistance to the auto industry, they must decide, is an ounce of prevention indeed worth a pound of cure?"

More on reports from CAR later....