by Gongwer News Service
November 3, 2008

The presidential race, the partisan tilt of the state House and other election questions are the immediate focus in Tuesday’s general election, but the issue of greatest importance to Michigan is not on the ballot even though it will dominate the attention of public leaders and private executives for some time.

The fate of Chrysler could be decided by Election Day, with the best-case scenario a merger with struggling General Motors.

The disappearance of one of the anchor members of the historic Big Three poses consequences of historic proportions for the state’s economy and state and local governments. Other manufacturers such as Packard long ago disappeared, but generally as their segment of the market diminished, the surviving companies grew to fill the void.

Now the domestic industry is in decline with imports gaining still greater strength, and the vanishing of Chrysler promises to deepen a recession in Michigan that is already in its eighth year.

Michigan would be hardest-hit of all states in job losses that could easily hit 30,000 directly as the companies consolidate. Total job losses, including suppliers and dealers, could reach upwards of 100,000.

That has the auto companies, Governor Jennifer Granholm and Michigan congressional members all pressing the federal government for financial help to stabilize the industry and forestall even worse consequences, such as a defunct Chrysler and a still-weakened GM.

But the White House is resisting those moves, and as of Friday talks appeared to have stalled on what an aid package could or should look like.

A meeting by the Michigan Economic Development Corporation to help cities and counties with potentially affected plants cope with the situation has been postponed.

But the Granholm administration is already taking steps for mid-year budget cuts that may be necessary from the combined effects of a sudden remaking of the state’s long-standing base industry and a national economy that is shrinking.

Whatever happens with a merger will come on top of a declining national economy and have a potentially devastating effect on state revenues. Mitch Bean, director of the House Fiscal Agency, said he would not be surprised if unemployment in the state spiked over 10 percent in the future, a rate it has not been at since the early 1990s.

And at some point, budget cuts for the current 2008-09 fiscal year must be expected, officials said.

That should easily overshadow what some had expected to see in the lame-duck legislative session, where unfinished business such as partial repeal of the Michigan Business Tax surcharge, possibly combined with prison reforms, awaits. Also on the unfinished and overshadowed list are property tax limits, a ban on smoking, wide-ranging bills loosening provisions for individual policies by Blue Cross/Blue Shield, new insurance options for its Accident Fund subsidiary and new options for transportation funding.

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