CAR on U.S. Economy Impact of GM’s Plant Investments

In an analysis of General Motors’ newly announced plant investments, the Center for Automotive Research (CAR) today said that more than 28,000 jobs will be retained or created, and will contribute almost $2.9 billion to the U.S. Gross Domestic Product. (See GM to Invest $2 Billion in U.S. Plants, Depending on Tax Breaks)

CAR estimates that this investment over the next year will in total support more than 28,000 jobs in the ailing U.S. economy, including 4,083 people directly employed by GM; 8,638 indirect jobs, such as goods and service suppliers and their suppliers, and 15,492 consumer expenditure-induced jobs, which result from the direct and indirect employees spending their earnings.

“There is no greater evidence of the positive effect of the historic federal intervention than large new investments in major U.S. automotive facilities on the part of the rescued firms such as General Motors,” said Sean McAlinden, executive vice president of research and chief economist at CAR.

 

CAR, a nonprofit research organization based in Ann Arbor, Michigan has carried many if not most of the studies investigating the impact of the U.S. motor vehicle industry on the U.S. economy since 1992.

The U.S. treasury directed taxpayer bailouts of General Motors and Chrysler, as well as the billions pumped into Ford Motor via subsidized loans for retooling plants by the Department of Energy were fiercely opposed by ideologues, and politically unpopular.

However, based on the CAR studies proponents say there are sound economic reasons why all industrialized nations, except the U.S., protect their auto industry.

The 28,213 jobs claimed in the latest study earn a total of $1.65 billion in salary, contribute almost $2.9 billion to GDP, pay $169 million in income tax, and contribute $362 million in transfer payments, such as Social Security, Medicaid, Unemployment, and others.

In November 2010, CAR revised its estimate of the total number of U.S. jobs saved by the federal intervention rescuing both General Motors and Chrysler from certain liquidation.  The total jobs saved at the time were estimated at 1.14 million along with $66 billion in annual U.S. personal income.

For the study, the authors assumed:

  • Vehicle manufacturers (OEM) directly employed 313,000 people
  • Includes manufacturing, research and development, headquarters, and all other operational activities
  • 686,000 people were employed in the automotive parts sector
  • Includes a percentage employment from rubber, plastics, batteries, and other non-automotive sectors
  • 737,000 people were employed in the dealer network selling and servicing new vehicles
  • 1,736,000 people were employed in the entire industry
  • The study shows that these 1.7 million direct jobs contribute to an estimated
  • 8 million total private sector jobs
  • More than $500 billion in annual compensation and
  • More than $70 billion in personal tax revenues

Therefore, the employment multiplier for OEM activities is 10, while the employment multiplier for the entire industry is 4.

The Center for Automotive Research’s mission is to “conduct research on significant issues related to the future direction of the global automotive industry, as well as organize and conduct forums of value to the automotive community. CAR performs numerous studies for federal, state and local governments, corporations, and foundations. (See also Treasury Secretary Defends $80 Billion Auto Bailout, Says 90,000 Jobs Added in Strongest Growth Period in Decade)

About Ken Zino

Ken Zino is an auto industry veteran with global experience in print, broadcast and electronic media. He has auto testing, marketing, public relations and communications expertise garnered while working in Asia, Europe and the U.S.
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