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Three million jobs could be lost in a year if America's "Big Three" carmakers - General Motors, Ford and Chrysler - are allowed to collapse, an expert predicts.
David Cole, head of the Centre for Automotive Research (CAR), an influential Detroit think-tank, said that so many US businesses depended on the Big Three for survival that allowing even one of the carmakers to fail would lead to tens of thousands of job losses nationwide.
"The immediate shock to the economy would be felt well beyond the Detroit companies, negatively impacting the US operations of international manufacturers and suppliers as well. Nearly 3 million jobs would be lost in the first year if there was a 100 per cent reduction in Big Three US operations," Cole said.
His grim prediction came as US politicians continue to debate whether the Government should allow the carmakers access to a portion of the US$700 billion ($1.27 trillion) bailout offered to the nation's banks.
A bill to rescue GM, Chrysler and Ford with US$25 billion in emergency loans will be taken up in the Senate today, but its passage is far from guaranteed as many Republican senators object to government intervention in industry. Even if it is passed, many experts fear that tens of thousands of job losses can not be avoided.
Patrick Anderson, chief executive of the Anderson Economic Group, a US consultancy, believes that at least 35,000 jobs will be lost if the Government intervenes to save the industry.
"The necessary restructuring to take capacity out of the market would lead to between 30,000 and 40,000 job losses nationwide," he said.
Cole said: "The likelihood of one or two of the Big Three ending operations is very real."
Job losses among suppliers of car parts and car sales companies, as well as those on the production lines, would be compounded by a massive drop in taxes and consumer spending power.
"Our model estimates that a complete shutdown of 'Detroit Three' US production would have a major impact on the US economy in terms of lost wages, reductions in social security receipts, personal income taxes paid, and an increase in transfer payments," said Sean McAlinden, CAR's chief economist.
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