Auto Industry Fallout Could Add 20% to Unemployment By: Curtis Ophoven 11/16/2008 - 4 Comments The number of people employed by the auto industry is staggering.  Each of the big three employs as many as 2.5 million. Your Ad Here Then there is the multiplier of others that work in relation to the industry. It has been calculated that for each factory job, there are five other related jobs from selling the vehicles to producing parts, to shipping and delivery. If any of the big three, GM, Ford and Chrysler goes under, they could add as much as 2.5 million x 5 = 12.5 million people to the unemployment, which is about 6-7% of the employment.  If we were to loose all three, it could add 20% to the unemployment.  That said, even if they were to go into bankruptcy, many of their workers will continue working.  The big question is what is more productive long-term, to bail them out with Federal money or let them go bankrupt?  The answer is looking more and more like letting them go under because then they will be able to renegotiate union contracts, supplier contracts and they will be forced to restructure with lower costs while improving their products. This week I participated in several blog carnivals. They did an excellent job and as usual, there are tons of great articles. If you have the time, I highly suggest you skim through this week’s carnivals. Carnival of Debt Reduction #165: A History of the National Debt at Greener Pastures Carnival of Personal Finance #178, Struwwelpeter edition at The Dierati Life Festival of Frugality~The Veteran's Day edition, hosted by On a Quest To Be Debt Free Carnival of Money Stories Edition 84 Money Hacks Carnival -- Aviation Month edition at Taking Charge Related Articles Video: Ron Paul on Global Economic Summit Bush Gets It Right: Intervention Not a “Cure-all” My Advice For President-Elect Obama Not Even Warren Buffett Can Escape the Economic Crisis The Nightmare that Nobody Wants to Talk About: The Next Depression   Subscribe via RSS Copyright © 2010 PennyJobs.com. All rights reserved. << FREE >> Weekly Newsletter... Signup today and start receiving our free weekly newsletter! Reader Comments Comment 1 Kyle Says: on Monday, November 17, 2008 10:59:51 AM This is a tough situation, but in the end I'm anti-bailout. If the big 3 fail, most of those jobs won't disappear. Foreign automakers will rush to fill the demand vacuum created by the collapse of 3 of the world's largest automakers. The asian and european manufactuers would not hesitate to expand operations in the US if their major competition were to disappear. Comment 2 Andy Says: on Monday, November 17, 2008 11:21:36 AM Under normal economic circumstances it would be better to let them enter Chp 13. However we are in unusual circumstancess and to ensure we have some market confidence left, they need help. However the bailout needs to be structured with a long term view and be the final source of help the US automakers get. Also new management should be put in place. Comment 3 Curt Says: on Monday, November 17, 2008 11:36:49 AM I have to side with Kyle on this one. I don't think a bailout is the right answer even in the unusual economic circumstances that we face. If they need a loan then they should look to the private banking sector rather then a federal bailout. Letting them go under will provide an opportunity for the formation of a new auto industry to be built. As assets are purchased at liquidation prices, entrepreneurs should be given the loans they need to rebuild the industry. Write a Comment Please keep comments civil and on-topic. Abusive or inappropriate comments will be removed without warning.  Name (required)     Email Address (required)     Website URL  Comment

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