Workers, Consumers to be Biggest Losers in Big Three Automakers? Breakdown

Michigan’s three major car dealers — Chrysler LLC, Ford Motor Co. and General Motors Corp. — have direly petitioned the Senate this week for a $25 billion bridge loan while autoworkers’ jobs hang in the balance. 

Senior executives say that without the bridge loan one or more of the auto companies could collapse by the end of the year. The companies that are most at risk, according to the Detroit Free Press are General Motors and Chrysler.

On Thursday, Congressional leaders said that no agreement had been reached. Instead, they asked the auto companies to submit formal plans outlining exactly how the money would be spent.

If Congress refuses the bridge loan, the companies may be forced to liquidate, which could translate into a significant loss of jobs in Michigan and across the country.

Ron Gettelfinger, President of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) said in prepared testimony to Congress Wednesday, “The consequences would be truly devastating, not only for UAW members, but also for millions of other workers and retirees across this nation, and for the entire economy of the United States. Hundreds of thousands of workers would directly lose their jobs at Detroit-based companies.”

In Michigan alone, the big three employed over 239,000 workers at the end of 2007. An additional 730,000 workers produce materials and parts that go into cars, and about 1 million more people work in domestic car dealerships nationwide.

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The fall of these automakers would boost Michigan’s already high unemployment rate. Statistics provided by Kaulkin Ginsberg Consumer Finance Analyst Dimitri Michaud show Michigan’s unemployment rate stood at 9.3 percent in October, compared with the national rate of 6.5 percent. The October unemployment figures for Michigan, released just this week, showed a surge from a rate of 8.7 percent just a month earlier.

Michaud predicts more job losses are on the way, placing particular notice on the cities of Detroit, Dearborn, Flint, Pontiac and Lansing because of their historic significance in automobile production.  

Such a significant loss in Michigan jobs could impact the state’s economy as auto manufacturing jobs are better-paid, on average, than other jobs in the state. The median household income in Michigan for 2007 was $47,950, compared to a median income for autoworkers of $50,233.

According to Gettlelfinger’s testimony, three million people from the auto industry and other businesses directly related to the auto industry could see their jobs eliminated.

The consequences also stretch to retirees. In his testimony, Gettelfinger said, “The retirees from these companies and their spouses and dependents – about one million persons – could suffer sharp reductions in their pension benefits.”  A significant loss would be suffered in health insurance coverage as well, he said.

Fred Morris, owner of car dealership Courtesy Ford in Conrad told The Great Falls Tribune, “If one, two or all three of those dealerships go bankrupt, it will have a major effect on our entire economy, bigger than the effect that the banks are having on this country, but I don’t think people realize that.”

Early Thursday, GOP legislators tried to push for a compromise, $25 billion being loaned to auto companies from the retooling fund previously established by Congress.  Terms for this loan dropped restrictions that the money be used to retool factories to build more fuel-efficient vehicles. But Congressional Democrats want a direct loan to the auto companies to come from the $700 billion economic rescue/bailout package.

Thursday afternoon, Democrats in Congress requested Michigan’s big three companies present a plan by Dec. 2 that shows restructuring in their businesses.  If these auto companies are able to show that taxpayers and autoworkers will be protected in their plans then lawmakers could consider legislation as early as the week of Dec. 8, congressional leaders said.

Senate Majority Leader Harry Reid, D-Nev. told reporters, “The key here is accountability and viability. That’s what we’re seeking. That’s not too much to ask.”