Auto Bailout or Bust? Should Boomers Believe It?

If one of the Big Three Auto makers fails, how many jobs are really lost?

Where are the two or three million lost jobs they are talking about?  The “Big Three” and the UAW claim, not only all of the jobs at GM, Chrysler, and Ford will be lost, but there will also be a huge job loss due to the ripple effect among their suppliers and the suppliers of their suppliers ………..That is just not true!

False Assumptions

The above is a pretty narrow minded, self serving perspective by the “Big Three”, the State of Michigan, and the UAW. They would very much like for people to believe the following false set of assumptions:

  1. If one of the “Big Three” fails, they all fail.
  2. The cars that would have been sold by the “Big Three” are not going to be sold by anyone else; therefore, fewer cars will be built.
  3. Since fewer cars will be built, fewer people will be needed to build cars.
  4. Since fewer cars will be built, fewer goods and services from their suppliers will be required; therefore more jobs will be lost.

All those assumptions make a good story for the State of Michigan, the UAW, and those companies that are after tax payer bail out money, but are not acurate assumptions for the auto industry as a whole or jobs in the United States as a whole.

A More Logical Set of Assumptions

A better set of assumptions might be as follows:

  1. All of the “Big Three” will not fail. Only one might fail.
  2. If one of the “Big Three” does actually fail, the other two and the rest of the auto industry will reap great benefits from increased sales and production volume. Example: If GM fails, Chrysler and Ford get well (along with others).
  3. The same number of cars will be sold in the United States no matter who builds them; therefore the same number of cars will be required to be built.
  4. If the same number of cars are built, it will require approximately the same number of people to build them.
  5. If the same number of cars are built, it will require the same overall support from suppliers.

So where are two to three million jobs lost?  First of all, it is not two or three million jobs. Secondly, most of what is lost would be in Michigan.  The only real losers are Michigan and the UAW.  Everybody else gets well.

The Real Story – Don’t Be Boom-bazzelled!

The fact is that the same number of cars are going to be sold and built in the United States, no matter who builds them. In order to sell them, you have to be competitive.  Jobs lost by the closing of one of the automakers will be gained by the others who are more competitive.  You can’t build cars that are not being sold and remain competitive. You can’t continue to pay people to not build cars and remain competitive. How many factory jobs are really lost, other than a few redundant management positions, if the same total number of cars get sold? If the “Big three” and the UAW want to be the ones to build them they need to get more competitive.

Solution … Boomers, buy more!

So where is the problem? The real problem is that not enough cars are being sold due to the panic over the economy.  People, especially Boomers, who have most of the money, are not buying cars out of fear of their own future.  They are either afraid to borrow money or can’t get a loan at this time. You cannot build your way out of this problem. More cars need to be sold to save the jobs of those who build them, or those that are willing to build them competitively. It really doesn’t matter who sells them or who builds them!

That is why putting money into the financial credit industry to increase credit availability makes some sense.  Giving money to the “Big Three” to pay for sins of the past doesn’t … unless you’re from Michigan.

Papa says so!

More on the Auto Bailout:

Tough Money Love: Taxpayer’s Betwen “Like A Rock and a Hard Place”

Free From Broke: Auto Maker’s Bailed Out For Now

Cash Money Life: Do We Really Need Another Stimulus Check

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