The $60-Trillion Equation*

From the Model T to the moving assembly line, the 8-track tape player to onboard computers, the U.S. automotive industry has contributed mightily to the nation’s economy. It also greatly accelerated countless industries, encouraged entrepreneurship, and is a major stalwart of America’s manufacturing base.

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* This analysis serves as an estimate of the scope and historical value to the U.S. GDP of Detroit’s auto industry and is not intended to advocate or reject the use of Detroit-directed taxpayer funds now being debated in Washington.

The name “Detroit” long ago became synonymous with motor vehicles. And if ever there was an industry that demonstrates the meaning of “economic impact,” it’s Detroit’s automakers.

Along with its century-old reputation for car-building came the enviable status associated with being the birthplace of the modern, moving, industrialized assembly line. For nearly a century, textbooks have recorded for the ages how Henry Ford’s mass-production process created astonishingly high weekly wages for its workers and, equally appealing but more beneficial to the nation, a permanent reduction in the price of basic transportation across all income classes.

This is a look into the rise of Detroit’s auto industry and an attempt to quantify a portion of the value it added to our nation’s GDP. Here is a summary of many — but by no means all — of the great contributions and accomplishments of a productive, energetic, competitive people with an unbeatable winning spirit. The wealth created in the process has endowed universities, art museums, engineering and medical research centers, libraries, countless community foundations, symphonies, opera houses, and other eleemosynary activities.

The $60-Trillion Analysis

Getting one’s arms around the tangible dimensions of an industry is challenging. In the case of America’s auto industry, which employs more than 2,000,000 people between the Big Three and its suppliers, the task is daunting. The exercise is made easier by systematizing the approach: List the input flows; track the output flows; measure both.

To make cars, trucks, buses — anything from Mars rovers and lunar landers to Navy patrol boats (as Ford did during World War I), the plant must receive numerous raw materials, such as steel, iron, aluminum, copper, brass, zinc, plastic, and rubber. Modern vehicles also require sizable volumes of electronic parts, specialized paint, glass, heating and cooling equipment, fabricated machinery and equipment, textile products, and the services of trucking and warehousing.

Some of these inputs are colossal in terms of overall national demand. To illustrate, motor vehicle output requires 32 percent of all aluminum consumed annually in the United States. Similarly, the auto process absorbs 23 percent of all U.S. zinc and glass; 68 percent of all rubber; and 14 percent of all steel. All told, these so-called “upstream” industries dedicate an estimated 2,900,000 jobs to the domestic auto function.

Once the vehicle comes off the assembly line, it’s typically transported to dealerships. But this is simply the most visible “downstream” employer and user.

With 22,000 dealerships in the United States employing 717,000 people selling new cars and warranties, it’s a giant component of the industry. It’s even more formidable when we recognize that each dealership is serviced by its own cluster of suppliers employing another 490,000 individuals.

To this hub industry, we add functions such as construction workers, truck drivers, those engaged in auto finance and insurance, wholesale and retail trade, advertising, and rail transport. These industries are by no means trivial. Advertisers alone devoted approximately 47,000 workers to automotive, as did the construction industry. In ordinary years, used cars sell three to four times the volume of new cars. There are some 93,000 jobs merely on the used-car side of the industry.

And what about the support industries when the buyer drives off the lot? Consider the more familiar 143,000 auto-repair establishments, with 680,000 workers, and the 43,000 stores selling parts and accessories, with 335,000 jobs. This downstreaming analysis of sold-vehicle operations includes 17,000 tire dealers with 143,000 workers; 14,000 car washes with 138,000 employees; rental services with 144,000 jobs; and parking and valet services with 81,000 jobs.

Other aspects of downstream support for motor vehicle operations are notable, as well. There are 127,000 gasoline stations, and more and more are complemented with convenience stores. These facilities now employ approximately 1,000,000 people across the country. Road and highway construction is bread and butter to more than 290,000 workers. There are more than 42,000 employees in the petroleum-refining industry, dedicated to the automotive sector. After all, 50 percent of each barrel of oil goes to automotive, at one level or another.

Besides using the logic of “upstream and downstream” to organize thinking about the industry’s tentacles and economic clout, we have to realize that many auto links can’t be pigeonholed. Consider recycling (junkyard and scrap) entrepreneurs. Some 46,000 wage, salary, and small-business people find livelihoods this way. Also, there are many independent laboratories engaged in research and development for the auto industry, from safety and environmental matters to futuristic design and energy use, both inside and outside of government. That’s another 44,000 jobs. The auto industry, alone, allocated $18.3 billion to R&D funding in 2000.

It would be double-counting to tally payroll, income, excise, and sales taxes, but we certainly need to add tolls on bridges, ferries, tunnels, and roads in order to develop a comprehensive breadth of economic impact when considering America’s 6,100,000 employees and the $428 billion generated yearly in motor-vehicle, travel-related expenditures. Revenues from gas taxes exceed $100 billion annually.

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