Auto industry running out of gas

The auto industry has been hit hard by the current economic downturn and credit crunch, and oil prices' meteoric rise to over $4 a gallon this past summer scared consumers silly. Now Detroit's Big Three - General Motors, Ford, and Chrysler - are looking for assistance from Washington to the tune of $25 billion, and the Congress is split.

Let's take a look at the two competing plans to bailout the automakers that are kicking around Congress.

1) Democrats are in support of propping up the automakers by reallocating $25 billion from the already approved $700 billion Wall Street bailout. This would give the government a stake in the companies and allow for strict government oversight of how the companies restructure in the coming months.

2) Republicans are reticent to draw from the $700 billion bailout intended for the financial sector. Instead, many are either suggesting that a good bankruptcy will teach those rascally automakers to run their businesses better, or insisting that the funds come from a $25 billion loan program that was already approved by Congress 2 months ago to help automakers make more fuel-efficient vehicles.

Whether you think the Big Three deserve to be bailed out by the government or not, it is undeniable that the failure of these companies wouldn’t create just ripples in the economy: it would create gigantic waves. GM alone has 120,000 employees in the U.S.; Ford has 80,000, and Chrysler has 66,000. And the Center for Automotive Research (cutely acronymed CAR) estimates that for each auto manufacturing position there are 7.5 jobs in industry-related companies. So not only will the car-maker fail, so will the company that assembles its car radios, and the company that makes the volume knob. One domino falls and they all start toppling.

CAR estimates that if the Big Three completely ceased operations, almost 3 million jobs would be lost in the first year alone. Now that's an extreme case but should give you some sense of what's at stake should the automakers crash.