Prospect of GM-Chrysler Deal Heightens Job Fears

Oct. 20, 2008 — -- The prospect of a merger between General Motors and Chrysler is leading to growing worries about large-scale job cuts in the already shrinking U.S. automotive sector.

The Wall Street Journal, citing unnamed sources, reported that as many as 40,000 jobs could be lost if the two auto giants, eager to cut costs, merged.

GM, which has announced several plant closures in recent months, is the top domestic automaker while Chrysler is third. Neither company has confirmed that they're in talks for a merger. Both have seen precipitous drops in sales this year.

"It may be the only thing these companies can do to survive, we understand that, but it's a concern for the employment situation," Andrew Stettner, the deputy director of the National Employment Law Project, told ABCNews.com. "It's a bad situation that's getting worse."

Stettner said the auto industry has already lost more than 100,000 jobs since 2005. Before the economic slump, he said, payrolls in the auto industry were shrinking even as those in other sectors were growing.

"With auto, we kept thinking we were at the point where they're getting to capacity [in employment] but they keep being overcapacity because sales keep going down, so it's a really bad cycle," he said.

In 2000, there were 17 million cars sold in the United States. This year, that number is on track to fall to 13.5 million, said David E. Cole, chairman of the Center for Automotive Research.

Cole said that while job cuts overall would be greater among hourly workers, proportionally, more white-collar GM and Chrysler employees would likely lose their positions.

"You don't need replicate staffs in the combined company," Cole said.

But Cole added that many of the job cuts would probably come in the form of buyouts as opposed to layoffs. These have become common practice in the industry. Most recently, Ford, the nation's No. 2 automaker, offered buyouts to 54,000 of its workers.

"The auto industry in general has been a pretty humane industry in terms of buying out employees," Cole said.