Tags: auto | bailout | brookings

Study: Fallout From Big Three Failure Grave

Saturday, 13 Dec 2008 04:55 PM

By Dave Eberhart, Newsmax

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A respected Washington-based think tank has published a new study that concludes that scores of U.S. metropolitan areas, big and small, will be hammered economically if the Big Three automakers fail.

Advocates of a federal bailout of Ford, GM, and Chrysler often vaguely point to a looming avalanche of job losses if the automakers go under. Now, the Brookings Institute has done a study on the real trickle-down impact to the country at large.

“Most of the metropolitan areas that would be most harmed by the Detroit Three’s demise are located in the Great Lakes region. They include large metropolitan areas such as Detroit, Cleveland, Buffalo, and St. Louis -- as well as many smaller ones,” advises the author of the report, Howard Wial of the Institute’s Metropolitan Policy Program.

These smaller metropolitan areas, called micropolitan areas, also have large percentages of employment in Detroit Three-related auto and/or auto parts manufacturing. For example, about 15 percent of all jobs in the Greensburg, Ind., micropolitan area -- a Detroit Three supplier location -- are in autos and auto parts.

In the Columbia, Tenn., micropolitan area -- home to a General Motors plant -- nearly 11 percent of all jobs are in those industries.

50 Metro Areas under the Gun

All told, concludes the report, there are 50 metropolitan areas that have at least 1 percent of their employment in auto manufacturing and auto parts manufacturing combined, and are home to at least one General Motors, Ford, or Chrysler plant -- and/or substantial manufacturing by major Detroit Three suppliers such as Delphi and Visteon.

“Metropolitan areas with at least 1 percent of their employment in autos and auto parts have more than 1.55 times the national average percentage of their employment in those two industries combined. They are the ones that would suffer the greatest losses of jobs and income if the Detroit Three companies were to go out of business,” concludes the report.

“Although 1 percent of a metropolitan area’s employment may not sound like a large number, the jobs and incomes created by the Detroit Three companies and their suppliers support up to twice as many jobs in industries -- ranging from auto dealerships to supermarkets to doctors’ offices -- that provide local services,” advises the report.

“Therefore, a loss of auto and auto parts jobs amounting to 1 percent of a metropolitan area’s jobs could mean a loss of up to 3 percent of the area’s jobs overall.”

Other findings of the report include:

  • Some metropolitan areas have very high concentrations of auto and/or auto parts jobs that depend for their existence largely on the Detroit Three. In Kokomo, Ind., about 22 percent of all jobs are in autos and auto parts. A loss of those jobs could mean a loss of well over half of all employment in the area.

  • In 12 more metropolitan areas where auto and auto parts jobs depend very heavily on the Detroit Three (Flint, Mich.; Battle Creek, Mich.; .Mansfield, Ohio; Columbus, Ind.; Detroit; Monroe, Mich.; Janesville, Wis.; Holland, Mich; Anderson, Ind.; Saginaw, Mich.; Springfield, Ohio; and Lafayette, Ind.) the percentage of all jobs that are in autos and auto parts ranges from about 5 percent to nearly 8 percent.

    A loss of Detroit Three and supplier jobs could lead to losses of 15 to 24 percent of all employment in these areas.

  • In a dozen other metropolitan areas where auto-related employment depends substantially on the Detroit Three (Ann Arbor, Mich.; Jackson, Mich.; Lima, Ohio; Danville, Ill.; Toledo, Ohio; Oshkosh, Wis.; Elizabethtown, Ky.; Grand Rapids, Mich.; Muncie, Ind.; Lansing, Mich.; Bowling Green, Ky.; and Tuscaloosa, Ala.), auto and auto parts jobs make up 3 percent to just under 5 percent of all jobs.

    Losses of those jobs could result in losses of 9 to 15 percent of all jobs in these metropolitan areas.

  • The loss of the Detroit Three companies would have a large impact on employment in auto and auto parts manufacturing nationwide. Metropolitan areas that depend substantially on the Detroit Three for their auto and/or auto parts jobs, as well as others that have less than 1 percent of their jobs in autos and auto parts, account for at least half of nationwide employment in those two industries combined.

    Metropolitan Detroit alone has nearly one out of every seven jobs in the two industries combined.

  • In most of these metropolitan areas these jobs account for at least 1 percent of total employment. However, there are also many auto and auto parts jobs in Los Angeles, Dallas, and Cincinnati -- large metropolitan areas where these industries account for a smaller share of total employment.

    Closures of Detroit Three-related plants in those areas would harm the workers who were laid off but would have less impact on metropolitan area economies.

    The South Not Immune

    Some of the affected metropolitan areas are located partly or entirely in the South (Elizabethtown, Ky.; Bowling Green, Ky.; Tuscaloosa, Ala.; Huntsville, Ala.; Nashville, Tenn.; and Louisville, Ky.), Northeast (Ithaca and Elmira, N.Y.), and the West (Ogden, Utah).

    There are 21 metropolitan areas, mainly in the South, where at least 1 percent of total employment is in autos and/or auto parts but where little or none of that employment is attributable to the Detroit Three or their suppliers.

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