Many analysts and commentators have seemingly been cheering for the imminent demise of the Detroit-based automakers. Something that needs to be realized amidst all this talk of low-interest loans and bailout money is how interconnected the auto industry is and how it affects our economy as a whole. Just like the global economy where the health of one country impacts all others, the same is true of the auto industry. It's been estimated that if General Motors fails, it will quickly cost the United States anywhere from 2.5-3 million jobs. Beyond the people directly employed by the automakers are direct suppliers and their sub-suppliers, many of which have been on the brink for years already. In addition, there are the tens of thousands of small and large businesses in Michigan communities and elsewhere whose existence depends on patronage from the people working in auto factories.

Even foreign automakers will feel the pain of Detroit's demise in a big way. Toyota, Nissan and Honda have all been hammered by the credit crunch in the last couple of months and their sales will likely drop further if people lose their jobs due to the failure of one or more of the Detroit automakers. The suppliers that will surely fail also supply Japanese-, German- and South Korean-owned factories in the U.S., so their collapse will have a huge impact on companies not based in Detroit.

Yes, the Detroit 3 have made a lot of stupid product decisions over the years and wasted a lot of money, but allowing the free market to pull them under will create a ripple effect that reaches more than just the shores of the Detroit River.

[Source: Detroit News, Photo by Paula Bermudez | CC 2.0]


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