View Full Version : What happens to the US economy if General Motors goes belly up?
12-17-2006, 07:38 AM
Lets say the rate of failure for GM can't be stopped and it all comes crashing down sometime in the next few years. Is this going to seriously impact he US economy, or is the US economy so big that even GM's crash will be easily absorbed?
12-17-2006, 08:39 AM
In 2006 General Motors spent 5.6 billion US dollars on medical coverage for the 750,000 US employees, spouses and dependants. This doesn't include the coverage for retirees. The total market capitalization for GM is only 16.55 billion.
Having that many people lose medical insurance at the same time is going to have a huge impact on medical care in the US, especially as uninsured and unemployed people start declaring medical bankruptcy. The trickle down effects are going to more of a deluge.
12-17-2006, 12:16 PM
Having that many people lose medical insurance at the same time is going to have a huge impact on medical care in the US, especially as uninsured and unemployed people start declaring medical bankruptcy.
A 1.7% increase in the number of people without medical coverage is going to have that big an effect? Googling suggests there are 44 million americans without medical coverage.
I would have thought a collapse of GM would be pretty nasty (especially in areas where GM's activity is concentrated, e.g. Michigan), but it wouldn't be a catastrophe unless it was combined with one or more other nasty things. Something like 30 million jobs are created and destroyed in the US every year, generally netting out at a surplus - even GM and several of its major suppliers falling over are not going to move the needle a huge amount compared to something really big, like a couple of points added to interest rates or a big jump in the oil price.
12-17-2006, 01:31 PM
Companies like General Motors don't go "Belly up" in the sense that an unsuccessful pizza joint goes belly up. The model lines, assets, technology and many of the assembly plants would be purchased by Chrysler, Nissan, Honda etc. and simply be redeployed.
LOCALLY, the effect would be devastating; across the country, it wouldn't really matter in the long run. The jobs lost in Flint that Michael Moore is so upset about have been replaced by equally good jobs in Nissan plants in Tennessee, or Honda plants in Ohio, or Toyota plants in Kentucky, etc. etc.
12-18-2006, 07:09 AM
The economy in Michigan is already second-worst in the nation (at least as far as unemployment) so, not to be callous but I don't see it having much impact overall.
According to Pliny
12-18-2006, 05:58 PM
GM won't be the first or last car maker to get a bailout, either in loans, or via concessions about import quotas, etc.
12-18-2006, 08:15 PM
A couple months ago GM announced a plant closing and laid off 3000 workers. Two pages farther in the paper there was an article announcing a new plant in China with 3000 workers. Coincidence I suppose.
12-18-2006, 08:29 PM
Toyota, Honda, and Nissan primarily build in the US to sell in the US (mostly in Southern states , I know the Nissan plant is in Smyrna, TN). In fact, Hyundai just opened a new plant in Montogomery, AL employing 2,000 people in 2005.
12-18-2006, 09:03 PM
I have a book from the sixties talking about the persistent recession in Detroit, and how it was going to have to do something besides build cars if it was going to have any hope of getting out of it.
That was forty years ago.
In those forty years entire industries have been invented: personal computers, cable TV, cell phones, Starbucks (you think that's not an industry? You think anyone had ever heard of a latte in 1965?) and of course the internets, all three of 'em. The economy now is far far bigger than it was then, and far less dependent on car manufacturing.
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