Analysts Weigh Economic Impact of GM Bankruptcy Filing

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• JUDY WOODRUFF:

  So what do closed dealerships and shuttered plants mean for the overall economy, and who is affected? For that, we turn to Mark Zandi, chief economist at Moody's Economy.com; and Donald Grimes, an economist at the University of Michigan's Institute for Research on Labor, Employment and the Economy.

  Gentlemen, thank you both.

  We heard from some auto dealers. We heard from a GM retiree. We heard from a bondholder, Mark Zandi, a woman who, with her husband, was invested in GM, but broaden the picture out. How do you see this affecting the entire economy?

  MARK ZANDI, chief economist, Moody's Economy.com: Well, I think it's very significant. You know, I think it's fair to say that the recession — the current recession that we're in will be longer because of GM and Chrysler's problems and the auto industry's problems broadly.

  And when the economy does begin to recover, that recovery will be measurably weaker than it otherwise would have been. In past economic recoveries, out of every other recession that we've been in since at least World War II, the auto industry played a key role in that recovery, creating jobs and income and wealth for our economy, but that clearly will not be the case coming out of this recession. And, thus, the recovery will be measurably weaker.

• JUDY WOODRUFF:

  Don Grimes, can you quantify that in terms of how many jobs are going to be lost more broadly in the economy, and who is going to lose those jobs?

  DONALD GRIMES, Institute of Labor and Industrial Relations: Well, a lot of the jobs have already been lost. The basic problem is that car sales have collapsed. We're selling at a 9 million to 10 million unit annual rate, whereas we were selling at a 16 million, 17 million unit annual rate a year-and-a-half ago.

  So a lot of these jobs have already been eliminated. We are going to continue to lose a few more jobs going forward. I think we'll find out more on Friday, but I think we'll be looking in the 500,000 unit job loss at that time.

  Overall, will a GM bankruptcy matter? Yes, but it's really more of a function of the collapse in car sales than it is a cause of all these job losses. The GM bankruptcy is a result of a drop in car sales.

• JUDY WOODRUFF:

  And, Mark Zandi, but help us understand who else is affected. We know it's the car dealers; we know it's people who work at General Motors. What about the suppliers, the people whose businesses depend on the folks who work at these automakers?

• MARK ZANDI:

  Right. Well, you know, the auto industry has its fingers deep into our economy. In fact, there's no other industry where, if you lose a job in that industry, it has bigger impacts throughout the rest of our economy, and it's not only the loss of jobs at those automakers, but it is the dealers, it is the suppliers, it is — because you lose a lot of income and wealth in those — in the lost jobs in those industries, they can't go out and spend, so that causes jobs in retailing and in different kinds of services to lose jobs.

  So just to give you a number, for every lost job at an auto assembler like GM and Chrysler, you lose as many as 10 other jobs in the rest of the economy, so that so-called multiplier is very, very large and very significant.