Will it be a Black Friday in automotive country?

Friday’s going to be a big and bleak day here in Michigan. General Motors Corp. (NYSE:GM) completed its third-quarter earnings report earlier this week; it also said it would make an announcement Friday regarding its operations.

What could GM have up its sleeve? Last week the merger talks between GM and Chrysler were shelved; it wasn’t clear depending which source you read whether the talks were merely suspended or if the talks were completely in the tank and that the merger was no longer an option. Is it possible that the the two automakers had solidified their plans to merge but simply put them on ice until after the election? This wasn’t obvious, but it could be a possibility.

Or is it possible that GM will announce a bankruptcy filing, especially since it may have burned through a considerable portion of the $19 billion in cash it had on hand only a few weeks ago while sales plummeted 45 percent last month and likely remain depressed this month. Although corporations of this size don’t typically telegraph such actions in advance of filing, it’s not out of the realm of possibility.

It’s less likely that anything came of the conversation the automakers and the United Auto Workers union had on Thursday with members of Congress; the state of flux as the 110th Congress winds down and the new Obama administration ramps up isn’t conducive to effective and efficient decision making among members of Congress.

Perhaps a report published earlier this week by the Center for Automotive Research (CAR) was timed to set up and frame the need for a bankruptcy filing or government intervention (keeping in mind that CAR is a nonprofit funded by the automotive industry and the results of its report might be skewed beneficially towards its donors). CAR reported that the failure of the Big Three might lead to the loss of as many as 2.5 million jobs nationwide; GM alone employs roughly 250,000 people, with a lion’s share in and around Detroit, as home to its corporate offices and its primary research facilities.

For each job at GM, there’s a ratio of at least 1-to-3 GM employees to Tier 1 through Tier 3 parts manufacturing and service jobs and other support jobs related to GM. (The proportions are about the same for Chrysler and Ford Motor Co.; CAR claims the direct jobs to indirect industry jobs ratio is much higher.)

There are other risks that haven’t been addressed in media coverage to date. The health care industry is actually Michigan’s largest employer right now, employing more people than the Big Three combined, but it’s grown large because of the automotive industry’s workforce and workers’ families and retirees. Once automotive industry jobs collapse, so do health care jobs at some point farther out as people begin to leave the state for other jobs.  This poses a loss of services to Michigan residents who aren’t in any way connected to the auto industry.

And yes, the retirees — there are liabilities to be paid out to these folks who worked long and hard, trusting and believing that their retirement packages would be waiting for them after decades of employment. These liabilities may not be fully funded after the dramatic drop in the stock market this quarter since much of the funding for these liabilities was investedand may not have been adequately funded to begin with.

All of this means that the auto industry is simply too large to fail. Many critics resist the idea that government should bail out the automakers since they’ve been poorly managed for quite a while, as evidenced by the example of cycle time from design to production for vehicles. Vehicles in production today at GM were designed back in 2005, when the price of oil was not as volatile, before gasoline had spiked up to $4 per gallon, and before buyers had lost their will to purchase, having seen their savings and 401Ks drop dramatically in value over the last six months. In contrast, overseas competitors like Honda and Toyota have design-to-production cycles of as little as six months, making it much easier to adjust to fluctuating market demands.

Perhaps government needs to push the auto industry to improve its management and its response to the market as a condition of a bailout, but government also has to get its ducks in a row. When gas prices were lower, there were tax incentives that encouraged the production of GM’s Humvees (a buyer could write off a large percentageof the cost of a Humvee if used for business). That tax incentive is now gone, but its existence warped GM’s view of market demand, tampering with the demand curve. Government needs to look at better quality-targeted incentives for vehicles with higher fuel efficiency on a progressive basis to encourage the right kind of consumption in spite of a temporary decline in gasoline prices.

There are many who believe we shouldn’t help the automakers at all, out of a Darwinian sensibility; if the automakers were smaller and so much of our nation’s manufacturing base hadn’t been shipped overseas, I’d agree. But the last eight-plus years have seen our status as an exporter completely reversed; we are a net importer of technology, for example, now at the mercy of other overseas suppliers who could hold us hostage. It’s a national security issue for us not to have and maintain manufacturing in this country for this reason: We should not be at the beck and call of other countries because we cannot make products we consume here.

The nasty bit of frosting on this very ugly cake is that Ford is also making an announcement in concert with GM on Friday, a veritable one-two punch of bad news.

In the end, something’s got to give and fast; Michigan could lose roughly 30 percent of its jobs if GM and Ford were to completely go belly up. I think this could safely be called a depression, the effects of which would not be limited to Michigan.