Minnesota jobs hinge on fate of auto industry
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Michigan's Congressional delegation said one or more of the Big Three automakers risk failure before year's end without assistance.
Many experts say that if General Motors alone falls, that could trigger the bankruptcy of Chrysler and Ford. That's partly because a GM collapse could shut down industry suppliers, the failure of which could then topple the other two top automakers
All of this could mean a lot of job losses -- including here in Minnesota.
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"Overall, if one or more of the auto companies shuts down as a result of a bankruptcy, Minnesota would lose between 14,000 and 52,000 jobs," said economist Robert Scott. "It's about anywhere from one-half to almost 2 percent of total employment in the state."
Scott is senior international economist with the Economic Policy Institute, a nonprofit, nonpartisan think tank based in Washington, D.C. He authored a study on the potential economic effects of auto industry failures.
Scott looked at jobs directly linked to car companies and indirect jobs of suppliers. For example, Ford, with a plant in St. Paul, said it has 99 suppliers in Minnesota doing $90 million in sales with the number two automaker.
Scott also considered jobs tied to the spending habits of auto industry workers. If the auto workers get laid off, they'll spend less in their communities, and he said local businesses will suffer.
"I think that would have a very large negative impact on the Minnesota economy," Scott said. "It's not in the top ten states; the impact is slightly below average overall for the country."
One of the groups that would feel some big impacts of an auto bailout is the Minnesota Auto Dealers Association. The group held their annual meeting Friday at a hotel in Bloomington, Minn.
The group represents more than 400 auto dealers in the state, and about 60-70 percent of those dealers sell domestic autos, a big chunk of them GM autos.
Paul Walser is head of the big chain of auto dealerships that go under the umbrella of Walser Automotive Group.
"If there's a bailout, it's business as usual, and you hope that in time with these funds these companies can reorganize themselves into profitable long term viable businesses," Walser said. "In the other situation where you have a bankruptcy, then things just happen a lot faster.
"But there will be some collateral damage with that approach," he said. "Let's say there's however many dealers in Minnesota that sell GM and Chrysler products, there would end up being half that many."
Walser thinks there are too many dealers and some need to close, though he doesn't want any of his to be on the chopping block. Three of his nine dealerships sell GM or Chrysler cars.
But Walser sees an auto industry that's still holding on, especially in Minnesota. His business has slowed the past few months, but it's still up compared to last year and he isn't planning layoffs.
"Everyone's nervous, but one good thing about Minnesota is that we don't have the same kinds of peaks and valleys," Walser said. "Midwestern biz is hanging in there pretty good, there are still people buying cars."
And, Walser thinks the big automakers will remain in some fashion no matter what.
"It's a question of how big and what capacity," he said.
Rod Gramse is a manufacturing engineer with MRG Tool and Die Corporation in Faribault. The company makes parts and custom equipment, about 10-20 percent of MRG's business goes toward the automotive industry.
"We want an industry that's gonna be solid," Gramse said. "That's gonna be able to come out as a stronger company."
Gramse worries the collapse of a Big Three automaker would cause widespread pain through the manufacturing sector. But, he shares a view also expressed by car dealer Paul Walser. The main issue for business is not the health of the auto industry, but consumers' death grip on their wallets.
"We're seeing more of a trend in just the attention on where things are at in general more so than on the Big Three," Gramse said.
It's unclear how swiftly the Bush administration will act to help out the auto industry, but money to do so could come from the $700 billion financial bailout fund.
