GM's possible bankruptcy weighs heavily on Detroit

By Karen Pierog

CHICAGO (Reuters) - Devastating.

That's the word being used to describe the impact on Michigan and its largest city, Detroit, should financially ailing automaker General Motors file for bankruptcy protection.

"It would be devastating," said Liz Boyd, spokeswoman for Gov. Jennifer Granholm, who is already anticipating the state's new budget will face a revenue shortfall.

"It would be a devastating blow," said Dana Johnson, chief economist at Comerica Bank, noting that the "relentless decline" in automotive employment over the last eight years was the main cause of the weakness in the Michigan economy.

Michigan's September seasonally adjusted unemployment rate hit 8.7 percent, up from 7.3 percent in September 2007, also topping the U.S. rate of 6.1 percent. Unemployment in the Detroit area that month stood at 8.5 percent, higher than the year-ago rate of 7.9 percent.

Johnson said the automotive industry accounts for 3.5 percent of the jobs in Michigan, compared with only 0.6 percent nationally.

"No state has more concentrated auto employment than Michigan." he said, adding there was probably an even higher concentration of those jobs in the Detroit area.

Detroit also hosts GM's headquarters in the downtown Renaissance Centre, where a slew of white-collar workers are employed.