Vision Credit Education, Inc.

Michigan has already been hit hard in the last several years by cuts in employment by GM, Ford and Chrysler. Their suppliers have also felt the pinch, many of whom are also based in Michigan. With a looming failure of Big 3 automakers in Detroit, Michigan may be in for an economic crisis of epic proportions.

Some argue that automakers are destined to fail after chronic mismanagement and high costs. They say that one or more of the automakers should be allowed to fail, opening up the market for the remaining players.

Many economists argue that allowing any of the Big 3 to fail could directly affect over 2 million Americans. They say that allowing such a failure to occur would be devastating, and would hit Michigan especially hard.

One question that remains is whether Chapter 11 protection could help one or more of these automakers make adjustments so that they could become profitable again. That remains to be seen.

Effects on Michigan

Regardless of whether the Treasury bails out automakers, one thing is for certain. Communities across Michigan that rely heavily on the automobile industry will suffer.

Job losses will occur, and unemployment is going to hit even higher numbers moving forward. This will put enormous strain on unemployment funds and on human services agencies. Any new jobs that are created will pay lower wages.

Tax revenues on a state, county and local level will drop. As corporate profits erode and individual homeowners become unable to make tax payments, tax revenues will drop.

Finally, as foreclosures continue to climb, the residual values of other properties will continue to erode. Even those residents with no ties to automakers will feel the effects.

Those under the heaviest pressure will hold state, county and city government offices. They are facing a dramatic increase in demand for human services and a rapid drop in tax revenues.

Recognizing this overdependence on the automobile industry, Michigan began an advertisement campaign a few years ago featuring Jeff Daniels, who touted the business-friendly environment in Michigan. We can expect to see Michigan try to recruit more businesses to relocate to offset the job losses in the auto industry.

If you are a Michigan resident and are feeling the pinch already, your situation will likely get worse before it gets better. The most important steps that you can take are to protect yourself and get help.

By regularly saving money from your paycheck, you can build a rainy day fund that can help you weather short-term interuptions in employment. There also a number of agencies that you may contact for assistance.

A credit counseling organization can help you develop an action plan for dealing with your debt and credit needs. A housing counselor can help you evaluate options to help you keep your home, even if you are falling behind on your payments. County agencies can help you get assistance with food, utilities and even provide rental housing assistance.

It is important to recognize the economic challenges that Michigan is facing so that you can protect yourself. Your ability to preserve your assets and maintain your credit are just as important as job security. If you find yourself facing trouble, get help early.