GM Job Loss: Bogus Economics

Nov.16.08 | About: General Motors (GM)

If General Motors (NYSE:GM) is allowed to fail, won’t we lose three million jobs? That multi-million job loss comes from both GM’s own employees, plus the suppliers and dealers. However, the economics behind that idea is pretty bogus.


The number of auto jobs we have is tied to the volume of cars we produce and sell in the United States. If GM fails and then the economy recovers, the jobs will recover. They may not be GM jobs.  They may well be Honda (NYSE:HMC) or Toyota (NYSE:TM) jobs, but still located here in the United States.


Or consider the alternative: that after GM fails, car demand never recovers. In that case, subsidies to GM continue forever.  The U.S. taxpayers continue to do what GM has done for so long: pay auto “workers” to not work.


It is possible to produce high quality cars fairly inexpensively, and in America. The Japanese companies do it. GM cannot. If GM fails, someone else will take up the slack.