GM: Loan $25 billion now or lose $156 billion later

General Motors on Sunday released a YouTube video extolling the lesser evil of a government bailout for the Detroit Three automakers. The four-minute piece reiterates many of the arguments being made by proponents of a government loan package, namely the fact that the American auto industry is one of the largest economic multipliers of any sector of the U.S. economy. A key argument is a potential loss of tax revenue would dwarf the cost of a bailout, not to mention a massive drop in GDP.


The video indicates the industry is faced with an “imminent collapse” that could lead to the loss of 3 million jobs in 2009. The thinking is the failure of either GM, Ford, or Chrysler would would lead to the immediate collapse of the other two, due to the impact on the numerous shared suppliers and other related industries.

GM says the Detroit Three employ 239,000 people directly, but the potential for job losses doesn’t stop there. The automakers also provide work for 610,000 employees of parts suppliers and 740,000 people working at GM, Ford, and Chrysler dealerships. 1.7 million so-called spin-off jobs are also said to be at risk.
On top of all this, U.S. car companies provide pension support to 775,000 retirees and health benefits to 2 million people.

A collapse of the U.S. auto industry would reduce personal incomes by $150.7 billion, the automaker warns. Over three years, that number could grow to $398.2 billion, as people struggle to find new work.

GM says the loss to the government in terms of tax revenue would be $60.1 billion in 2009, $54.3 billion in 2010, and $42.0 billion in 2011. That’s a total of $156.4 billion in lost tax revenue. Even if the three-year impact is exaggerated, the $60 billion loss projected for 2009 is hard to dispute.

Perhaps GM’s strongest argument for a bailout speaks to the potential for far-reaching damage beyond the auto industry. The video says the current economic downturn was spurred by a 0.3% decline in GDP. The U.S. automakers purportedly contribute to 4% of the nation’s GDP — a sudden drop of that magnitude could easily cause a widespread panic.

Lastly, GM points out a collapse of the American carmakers would leave the United States without the manufacturing capacity needed in the event of a “broad military conflict.”

Does GM make the case? See the video below: