Imagine Impact on U.S. Economy If Auto Industry Did Not ExistApril 01, 2019
The United States automotive industry is a critical component of economic growth with extensive interconnections across the industrial and cultural fabric of the U.S. Perhaps the best way to understand the impact the automotive industry has on the United States is to imagine if it was taken away.
In the Great Recession, it was a very real possibility. So real that two of the three American automakers, Chrysler – today Fiat Chrysler Automobiles – and General Motors Co. received, by the summer of 2009, $80.3 billion in federal assistance to stay afloat. Ford Motor Co., meanwhile, did not take any federal money, relying instead on a line of credit established in 2007.
At the time, the Center for Automotive Research in Ann Arbor, Michigan, forecast the impact of all three automakers going under: 240,000 direct jobs lost, 980,000 supplier and dealership jobs lost and another 1.7 million jobs lost via the ripple effect.
Within three years, the center reported, the government effect between lost tax revenue and increased burden on social-welfare programs would have been $156 billion. Meanwhile, Standard & Poor’s forecast that the loss of the Big Three automakers would mean an extra one million vehicles would be imported, costing the U.S. economy $25 billion, at the time 0.2% of the gross domestic product.
Today, the auto industry accounts for 3% of the gross domestic product, according to the 2018 national report by the Alliance for Automobile Manufacturers, the largest of any industry. The auto industry also spends $16 to $18 billion every year on research and product development – 99 percent of which is funded by the industry itself.
In a 2011 study looking at the economic impact of Hyundai, the Center for Automotive Research found that its manufacturing operations and dealerships alone in the United States contribute $7 billion to the gross domestic product.
The automotive industry is responsible for 7.25 million jobs nationwide – 45 states have more than 10,000 workers in the industry and 20 have more than 100,000 – and 4% of the jobs in America are connected to it in some way.
In a 2014 map compiled by the Center for Automotive Research, most of the automakers’ plants in North America, both vehicle assemblies and parts production, sit along a line that stretches from mid-Michigan south to central Alabama. Filling the space in between are suppliers, represented by brown dots, with a blob filling up southern Michigan, northeastern Indiana and most of Ohio.
“It varies significantly from product to product and plant to plant,” says Bernard Swiecki, assistant director of the industry, labor and economics group at the Center for Automotive Research, of the parts produced near assembly plants. “What you have typically are certain components that, either because of weight, fragility or the need to be sequenced, must be made close to the plant. That’s an exposed risk because if the plant closes, the supplier plant is likely to close because it’s likely they don’t have multiple customers.”
As for the outlook, manufacturing is forecast to increase faster than the general economy. The MAPI Foundation says increased capital growth and higher exports will boost manufacturing. It predicts production will grow 3.9 percent in 2019. It will slow slightly to 2.4 percent in 2020 and 1.9 percent in 2021.
Medore, Josh. (2019. “Impact of Auto Industry Stretches Widely”. Retrieved from https://businessjournaldaily.com/impact-of-auto-industry-stretches-widely/.