The Big Three and the Small 50,000

Posted by: John Tozzi on November 24, 2008

As I was reading about the auto industry bailout on the way into work this morning, a question occurred to me: How many small businesses depend on the US auto sector?

I don’t think I’ve seen a figure reported in any of the coverage. I just did a quick Census search, so this is very rough. But the answer is somewhere north of 50,000 companies whose fortunes are pretty directly tied to the Big Three.

That’s counting auto parts and tire manufacturers, parts wholesalers, and new car dealers, according to Census figures from the 2006 County Business Patterns survey. (One caveat: The Census counts “establishments” rather than companies, which means if the same company has two plants, they’re counted separately.)

Here’s a screenshot of my query results:
auto_chart.JPG

These 57,000 establishments employed 2.4 million workers in 2006, for an average of 43 employees each, with the average salary about $47,000. Now, some of these are suppliers to foreign automakers in the US, so they may not be as directly affected by the fates of Ford, GM, and Chrysler. Also realize that this doesn’t include those companies that sweep the floors at GM plants, etc. (It’s a lower estimate than some have put out there — one estimate said one in 10 US jobs depended on on the Big Three, but it turns out that’s only if you count car washes, etc.)

Those 50,000 companies should be at the heart of the discussion of any auto bailout. That’s why some people in Detroit want to put a different face on the bailout than three CEOs in private jets:

The carpool idea came out of meetings on Friday at Dura Automotive Systems Inc., an auto parts maker in suburban Rochester Hills. President and CEO Tim Leuliette said that during the weekend they contacted the automakers, suppliers, dealership groups and the United Auto Workers and the movement began building.

Industry representatives want Congress to see not just three CEOs in suits during the hearings, but the many people dependent on the automakers for their livelihoods, Leuliette said.

“Quite honestly, this is about America,” he said. “This is a process of people’s lives being affected, and sometimes they don’t know how to put a voice to those concerns.”

If you’re trying to wrap your head around how much is at stake in how this gets resolved, think of the Small 50,000. And if anyone has seen a more precise estimate of how many small companies depend on Detroit, please pass it along.

Reader Comments

Jeff B

November 26, 2008 11:57 AM

Those 50,000 depend upon the big 3 as "going concerns" -- not as they presenty are: Failed business models. Propping up companies who spend too much effort avoiding competition, lobbying for tax dollars they don't deserve, and making products people don't want to buy will not help anyone in the long run -- incl those 50,000.

bob, flint,mi

November 26, 2008 01:28 PM

I see a couple problems with the bailout of the auto industry, in fact all of the bailouts. First it’s nothing more than welfare for business and it rewards greed and poor planning. As long as GM sold cars and made big profits, they caved into the demands of the UAW and just past the cost on to the consumer. The banks Loaned money to people who could not pay it back and than charged a higher interest rate to compensate for it. What a crime! The banks need to be regulated big time. Secondly it does nothing for the vast majority of Americans that make this country work except create more debt.

If people are fearful of losing their jobs, no amount of bailout money provided to failing business will help that situation. People that are questioning their job security wont be buying cars and homes or spending big dollars this holiday season. Opening up lines up credit to people that are fearful of losing their jobs may save the banks but does nothing to promote what this country needs most and that is job growth. Job growth in the manufacturing sector, not those prized (ha ha) service jobs. NAFTA has done wonders for China but look what’s it’s done to us. Only manufacturing job growth will get us out of this economic depression. If its sold here, it must be built here, otherwise the bailout will fail. The bailout will be just another debt for our children to pay!

Joyce Madden

November 30, 2008 04:52 PM

Joyce Madden
Nov 30, 2008 4:53 PM
I concur with Jeff B and Bob, Flint, MI on the article, “The Big Three and the Small 50,000.” It is hard to feel sympathy for the companies that take away jobs from the American people for a profit. GM, Chrysler and Ford corporations export part of their automotive functions abroad to save operational costs while charging the American public exuberant costs for crappy cars to make a profit. Small businesses do not have the financial flexibility to handle the losses as a corporation does. When the economy is bad, they cannot afford to take $2,000 - $10,000 salary or bonus cuts. If corporate leaders experience losses, they are removed from their positions with nice hefty compensation packages and business goes on as usual. Who will take care of the small businesses? Who will ensure that the small businesses and their employees are compensated in this recession?

Lafate Smith

December 2, 2008 02:15 PM

This is an informative blog containing more detail statistics on how the big 3 affect small businesses in general. The fact of the matter is that the collapse of the big 3 will significantly affect all of us. Think of the Mom and Pop stores and restaurants where these manufacturers are located who are solely depended on these companies. Imagine the amount of income that will be zapped out of the economy as all of these laborers are laid off. These folks will cut back and potentially stop purchasing goods of all sorts. Let us not forget why those of us who have jobs and businesses are fortunate enough to maintain them currently. It is because we have a product or service that is in demand. The more income that is zapped out of the economy the weaker the demand across the board and the more vulnerable those who currently have jobs and businesses become.

Notwithstanding the foregoing, I totally believe in capitalism and under normal circumstance would be totally against government assistance of any failing, public, competitive, for profit enterprise. I also agree with many that state that at least one of the big three is in such a financial and manufacturing quagmire that failure is all but inevitable. However, I’m sad to say that due to the mismanagement and oversight of federal programs, fiscal policies and the greed of our so called leaders, our country is in such a bad state that we are forced to ask the question that despite the fact one or more of the big 3 will meet their eventual demise, is now the time to sit back and allow that to happen with our country in such great peril. In other words, will providing the big 3 with the assistance have less of a financial impact on the economy in the short term and buy us time to attempt to rebound from this unbelievable economical chaos in the long term. Of course economical sound minded Americans will understand that either way, government intervention and attempt to assist and adjust a capitalistic market will come back to bite us.

Lafate
www.baaci.biz

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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