Published 10:40 am Tuesday, November 18, 2008
for the country
Sometimes when a thing is in plain sight, it almost becomes invisible because it blends so easily into the landscape. That is true of the U.S. auto industry. It has been a driver of the U.S. economy for more than a century, extending from the days of the hand-crank starter to the coming era of the electric car. It is both an industry that has global economic impact as well impact on Main Street in cities and small towns across America. Because it has been so much a part of the American landscape for so long, it is easy to forget the critical role the industry plays in the economy.
At a time now when the domestic auto industry is facing unprecedented, survival threatening stress caused by the global financial crisis, it is important to remember the enormous impact this industry has on the U.S. economy and on the lives of millions of Americans who depend on it.
Almost 4 percent of U.S. gross domestic product is auto related, representing 10 percent of U.S. industrial production by value. One out of every 10 U.S. jobs is connected to the industry. In fact, GM, Ford and Chrysler account for roughly 70 percent of U.S. auto production and last year purchased $156 billion in U.S. auto parts. The industry is the largest purchaser of U.S. steel, aluminum, iron, copper, plastics, rubber and computer chips.
The industry is not just an important base of industrial strength. It is a source of technological and intellectual leadership. The industry spends $12 billion annually on research and development in the U.S., second only to the semi conductor industry in R &D spending. Through its research efforts, the auto industry will play a critical role in diversifying our energy sources away from imported petroleum to create advanced propulsion vehicles powered by electricity, bio-fuels or hydrogen fuel cells. In the 21st century economy, global leadership will be determined by brainpower, and the loss of the auto industry’s investments in research and technology would be a severe setback to U.S. global competitiveness.
The auto industry plays an important role in the local economies of communities in every state. There are some 14,000 U.S. brand dealers in cities and towns across the country, employing approximately 740,000 people with a total payroll of some $35 billion. U.S. based companies have 105 assembly and component plants in 20 states, including such “non-auto” states as California, Texas, Kansas, Louisiana and Maryland. In addition, the companies provide benefits for 775,000 retirees and surviving spouses and provide health care benefits for two million.
The consequences of the collapse of the U.S. domestic auto industry would cause suffering not only in Detroit, but everywhere in this country from Main street to Wall street. These are not idle warnings. The collapse of the U.S. based auto industry would cost nearly three million jobs in the first year, according to a study released this month by the Center for Automotive Research. The Ann Arbor, Mich.- based researchers also project that U.S. personal income would drop by $150.7 billion, government payments for unemployment insurance and other aid would increase by $14.3 billion, Social Security receipts would drop by $21.1 billion and personal income tax collections would fall by $24.7 billion.
The U.S. auto industry is vital to the health of the U.S. economy, and this industry needs assistance now from the federal government to help it survive the global financial storm that has shaken the world’s economy. The consequences are unthinkable if we refuse to assist this powerful engine of economic growth in its time of need. More than the future of this industry alone is at stake. It is a question of U.S. jobs as well as the ability of the U.S. to compete effectively in the global economy. It is a question of whether the U.S. will retain the technological prowess to lead the coming transition to a new era of alternate fuel vehicles. In the hyper-competitive global auto industry, we know other automakers are also racing to introduce new technologies, including some with the direct assistance of their own governments. The economies of the world will recover from this current downturn, and the U.S. will need a strong and healthy domestic auto industry to meet America’s economic, energy and environmental needs.