The Centre for Automotive Research (CAR ) said the toll would be magnified because many US component suppliers would also fail, with a knock-on effect on factories run by foreign automakers in the country causing temporary shut downs.
Even if just one of the Big Three fail, CAR estimates that the ripples would still idle all US auto production, wiping out 2.5m jobs. By the second year, the surviving domestic carmakers would restore half of their former production while foreign companies would resume production and pick up some of Detroit’s lost volume. By the third year, 1.5m of the lost jobs would be recovered.
What is scary is that the think tank believes one of the two scenarios is probable within 12 months.
Chrysler could run out of cash to fund operations by the middle of next year and is preparing for a possible break-up of the company now that GM has ruled out a merger, following talks with Cerberus Capital Management . Chrysler has said only it will continue to focus on “liquidity” and “alliances”.
US news agencies said Cerberus might sell the Jeep brand and outsource finance and human resources operations. It is also considering selling the Viper sports car as a separate brand.
Reports added that the company was haemorrhaging US$100m per month to support ailing suppliers, in addition to cash to pay for hefty incentives to prop up sales.
US car sales plunged 34% from October 2007 to an annualised rate of less than 10.6m – the worst monthly result since February 1983.