Auto-job estimate doesn't tell whole story

Supporters of a bailout for the U.S. automakers have frequently cited a statistic that the industry supports one in 10 jobs in the country. That figure likely overestimates the effect a collapse of one or more carmakers would have on the economy.

The statistic seems to indicate 10 percent of U.S. jobs — a total of about 14 million jobs, as measured by the Bureau of Labor Statistics nonfarm payroll report — could evaporate if the three big Detroit automakers are allowed to fail. But that is not what the statistic refers to.

The figure appears to come from a 2003 study by the Center for Automotive Research on the "economic contributions of the motor vehicle to the U.S. economy, to a multitude of U.S. industries in retail, manufacturing and service sectors, and to individual Americans."

The center is a nonprofit research organization with ties to labor and government. The study was commissioned by the Alliance of Automobile Manufacturers, an industry group.

The study concludes that "new-vehicle production sales and other jobs related to the use of automobiles are responsible for one out of every 10 jobs in the U.S economy." The term "responsible for" is interpreted quite broadly and covers jobs in steel, glass and electronics in addition to those in taxi-driving, travel and advertising companies, among others.

The study has two drawbacks in addressing the question of how many jobs are at risk if the Detroit automakers go bankrupt. First, the study uses data from 1998 to 2001, and the industry has changed significantly since then.

Second, the auto-related jobs covered in the report include more than those dependent on the Detroit automakers; they are related to cars sold by any manufacturer in the U.S. market.

In other words, the loss of a single U.S. car company would not necessarily dissolve all those jobs that the entire auto industry supports. The failure of General Motors, for example, would not eliminate the entire carwash industry.

That is not to say there would be no ripple effects. The Center for Automotive Research has done a more recent study on that question.

The study estimates "the economic impact — in terms of jobs, compensation and tax revenues — of a major contraction involving one or more of the Detroit Three automakers," in two separate situations. In both cases, there would be significant short-term shocks to employment, leading to direct and indirect job losses of 2.5 million to 3 million in 2009.

Some argue that most of these jobs would be recovered, because foreign-owned auto companies would expand their U.S. plants. Others predict that foreign companies would instead expand their production overseas because of cheaper labor and because the suppliers that now serve domestically and foreign-owned U.S. plants would be pulled under along with the Big Three.

The center's study extrapolates only to 2011 but it finds that 40 percent to 59 percent of the jobs would be recovered by then.

Another argument bailout supporters put forward is that U.S. national security would be harmed if the Big Three go under.

But GM, Ford and Chrysler long ago exited the defense business. Many of their suppliers make the axles, transmissions and engines used on military vehicles, but defense experts see little risk to the armed forces beyond paying higher prices.

"It's a stretch, quite frankly," said retired Army Lt. Gen. John Caldwell, chairman of the National Defense Industrial Association's combat-vehicles division.

On Sunday, retired Army Gen. Wesley Clark pointed to the rapid production of mine-resistant, ambush-protected vehicles as evidence of what a healthy domestic automotive sector can do on short notice.

Thousands of the so-called "MRAPs" that protect U.S. troops from roadside bombs have been built in the past few years and sent to Iraq, Clark wrote in The New York Times. But the Big Three had no role in making the MRAPs, said Dakota Wood, a retired Marine Corps officer and a military analyst at the Center for Strategic and Budgetary Assessments in Washington.

Information from The Associated Press is included in this report.