GM (GM) is about to notify about 20% of its dealer network that it will not renew its contracts with them when they expire next year. By most estimates well over 1,000 GM dealers will be cut off.
The action will add to unemployment nationwide and it could cause a significant increase in joblessness over the next several months. The 1,000 GM dealers probably employ over 50,000 people. Each dealer has its own suppliers and vendors so the impact will not be contained to only the workers that the dealer have on their payrolls.
Between Chrysler and GM, the total effect on unemployment due to dealership closings will be 100,000 people, and perhaps more. The other large car companies are also trying to improve the efficiency of their distribution systems. Toyota (TM), Ford (F), Honda (HMC), and some of the smaller car companies will certainly make cuts of a magnitude similar to the ones by Chrysler and GM. That could push a total of 200,000 people out of work, many of them located in areas which are already economically depressed.
If the government is hoping that the rate at which the economy is losing jobs will drop below 500,000 people a month, it will have to make up for a lot of people being pushed out of the distribution, sales, and service businesses built around the large car firms.
Douglas A. McIntyre