3 million lost jobs? Industry exec warns of 'catastrophic collapse' if automakers fail

November 18, 5:09 PMBusiness ExaminerDarrell Proctor

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Rick Wagoner, CEO of General Motors,
painted a portrait of gloom and doom
for the auto industry and the economy.

Executives from the nation's leading automakers are pleading with the federal government to bail them out of their financial crisis.

And they're not shy about tossing out numbers to illustrate the damage that their failures would do to an already battered U.S. economy.

Numbers like:

• Government tax losses of $156 billion over three years
• Loss of $150 billion in personal income
• The disappearance of 3 million jobs

General Motors CEO Rick Wagoner told a Senate panel today that the economy would see a "catastrophic collapse" if U.S. automakers fail, and rattled off those numbers to make his point.

A financial analysis from Deutsche Bank economist Joseph LaVorgna says that if one of the Big Three automakers were to go bankrupt in the first quarter of 2009, U.S. gross domestic product would drop at least 4 percent. It said auto production would go down 30 to 35 percent, and unemployment would increase to at least 8 percent and possibly higher.

Auto executives know those are numbers an incoming Obama Administration would not want to see.

Such a level of economic devastation would far exceed the government support that our industry needs. This is about much more than just Detroit. It's about saving the U.S. economy from a catastrophic collapse." - Rick Wagoner, CEO of General Motors

Wagoner, Robert Nardelli of Chrysler and Alan Mulally of Ford spoke at a hearing called by Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee. Democrats have talked about taking money from the $700 billion financial bailout package to help automakers. President Bush and Senate Republicans say they would rather take a previously approved $25 billion package - money set aside to help automakers retool plants to make more fuel-efficient vehicles - as a financial aid.

While there's disagreement on whether a bailout should be offered - and if so, how much - there's little bickering about what automakers need to do to save their industry.

Said Sen. Charles Schumer (D-N.Y.): Automakers are "too vital to let fail. We need a business model based on cars of the future."