During my
younger years one of the familiar
sights on the I-96 expressway, driving to or from metro Detroit, was the Ford
Wixom plant. Opened on April 15, 1957, it would eventually encompass 4.7
million square feet and produce over 6.648 million automobiles—most of them
Lincolns and Thunderbirds.
In January 2006,
Ford Motor Company—suffering from sagging sales, coupled with having too much
manufacturing capacity and too many employees, and
foreseeing problems in the future if it didn’t realign itself to become leaner
and more efficient--announced its intention to close 14 North American plants
by the year 2012. Of that total, seven of them were assembly plants and the
rest were power train and stamping facilities. One of the sites on the list was
Wixom. Ford’s overall work force, as a result of this downsizing, would be
trimmed by 25,000 to 30,000.
They called
their plan ‘The Way Forward.’
At the time of Wixom’s closing in May of 2007,
around 2,000 people worked there. I remember the rows of parked cars, each of
them driven by an employee who, in turn, used the pay check to support his or
her family in a comfortable manner.
Ford had already been trying to reduce its
employee numbers through less drastic means, offering early retirement for
older workers with a ’30 and Out’ Program.
The closing was a far cry from the 1980s
when Wixom was “the most profitable plant in the industry, a result of Cadillac
downsizing its lineup and losing ground to Lincoln.”
But Ford was not alone in addressing
needed structural changes. The two other Detroit-based automakers, General
Motors and Chrysler, were also making cuts in their respective operations,
although (as it turned out) not quickly or as deeply as needed.
This reversal in fortunes for the Detroit
automakers during the first years of the 21st century was surprising
(at least to the general public) given what had occurred during the previous
decade.
Throughout the 1990's, Michigan’s and the
nation’s auto industry had enjoyed healthy growth. In June 2000, our state could
boast that 333,000 of its residents worked in the auto industry, a number that
represented 29 percent of the nation’s 1.2 million auto jobs.
Those three companies, their employees, and
the network of suppliers--as we well know—experienced some pain and suffering
over the next few years. Their troubles were due to the structural problems
they were already addressing, but made worse by the Wall Street meltdown that came
in late 2007, resulting in tight credit which caused a slump in sales and, in
turn, a rapid depletion of surplus cash.
Ford, having mortgages its assets to the
hilt, had enough money to weather the economic storm. General Motors and
Chrysler, however, soon ran out of money.
The overriding question of the day back
then was: Should the government help and, if so, how? Or, should these two
companies declare bankruptcy and see what happens? Would they survive or go out
of business?
They were similar to the questions that
arose on whether or not to assist the big banks and stock brokerage houses
(what we refer to as ‘Wall Street’) that were suddenly in trouble and, if
allowed to fail, threatened a lot of collateral damage.
As it turned out the damage did occur. Many
individual Americans lost their homes when their mortgages went ‘under water’
and Main Street businesses suffered from losing access to needed credit lines
along with slumping sales. Many of these businesses survived, but many didn’t.
Still, without governmental assistance, it likely would have been even worse.
* * *
A person’s
perspective on how well or how poorly
the economy is faring is often based on their personal circumstances. That may
not be an accurate way to judge the situation—the objective criteria might
indicate otherwise--it’s nevertheless an understandable one.
By any measure, the economy in the United
States (in general) has gradually improved in the years since the Great
Recession and the troubles suffered by the ‘Detroit Three.’ That’s been true
here in Michigan as well, with increased auto sales playing a big part in the
state’s recovery. Even so, the upward climb has not reached the same heights
that existed before this economic free fall--and for many individuals and
families who might have lost a good-paying job, abandoned their home to
foreclosure, or seen the retirement savings invested in the stock market
evaporate--the current rebound has not bounced nearly high enough to offset
such personal calamity.
President Obama takes credit for the
improved economy and lower unemployment rate, citing the policies he’s
initiated since taking office nearly eight years ago when the nation was in the
depths of despair. Not least of those policies was his decision early in his
administration to save General Motors and Chrysler with loans and other
supportive measures and to also continue the moves by his predecessor,
President Bush, to bolster the financial sector after the Wall Street Meltdown.
In Michigan, Governor Snyder (who took
office two years after the President) and the Republican majority in the
Legislature feel their measures of cutting business taxes and reducing
regulations have made us “The Comeback State.”
It’s helped both at the national level and
in our state that interest rates have remained low and that for the past couple
of years people have had a little more discretionary income due to lower gas
prices.
But, of course, we’re in the midst of the
‘crazy season’-- better known as a presidential campaign--and to hear the talk,
Michigan is a train wreck and the country has gone to hell in a hand basket.
Would-be office-seekers, whether Republican or Democrat, have a tendency to
paint with a broad brush and make pronouncements that may or may not be
accurate or achievable.
One of those assertions we’ve heard is that
all of those tens of thousands of good-paying auto jobs to Michigan can be
brought back, in part by making trade more protective.
I’m not an expert on the intricate workings
of the auto industry or world trade, but I’ve tried as best I can to understand
the basics and to keep abreast with unfolding developments.
At age 65, having lived in Michigan all of
my life, I understand the nostalgia involved in wishing to see our state return
to its economic heyday when tens of
thousands of men and women worked in the automotive manufacturing industry
and the corresponding prosperity and confidence this created across the board. Back
to a time when you could find a factory job right out of high school, join all
of those other workers at plants like Wixom, and have some assurance that the
job would last until your retirement.
Still, I try to be a clear-eyed realist and
to accept that while there are instances when a person or a society can
recapture previous glories, more often than not the past is the past. That
history can provide us valuable lessons, it can be a foundation to build upon,
but life only goes in one direction and there are no guarantees. The future,
despite our best-laid plans and strategies, is murky and prone to unpleasant
surprises.
Here are a few realities as I see
them.
One of the big factors in fewer automotive
jobs has been automation. It’s a trend that’s been going on for decades, albeit
at a slower pace than the acceleration that’s been taking place in more recent
years; a quickening brought on by the introduction of computers, sophisticated
software, and robotic manufacturing.
Another factor is decentralization. In the
1930’s Michigan had accounted for over
60 percent of all automotive employment. By 1958 this state had shrunk to about
47 percent of the nation’s employment in the industry. Assembly plants were
moved elsewhere to be closer to major markets.”
Increased competition has changed the
landscape. Where once Detroit automakers dominated both North American and
international markets, auto companies in Asia and Europe have gradually taken
market share from the American companies. In addition, they have built assembly
plants and research-and-development facilities in this country to complement
those located around the world. Several of them are located in Michigan.
‘The Domestic Three’ have to remain
competitive with these other companies, doing business not only within the
United States but also Canada and Mexico, the rest of Latin America as well as
Europe and Asia.
Trade polices need to be prudent and take
into consideration their impact on employment and in allowing companies to be
profitable while remaining in the country. But overly protective actions invited
retaliatory responses. High tariffs begat high tariffs. What we might gain in
one area, we risk losing in another. For example, our second largest
industry—agriculture—exports many of its commodities.
At a time when Russia and China are flexing
their military muscles and seeking to expand their spheres of influence, trade
serves a means of drawing nations closer to us.
* * *
General
Motors, Ford, and Chrysler have
rebounded from the dark days of the Great Recession and at the moment the auto
industry is enjoying record sales. Last year over 17 million vehicles were sold
in the United States. Michigan, while no longer the dominant player it was in
earlier decades, still produced more cars and trucks than any other state. It’s
not as good as it once was once employment-wise and market share-wise, still we
remain a key player.
While there are no guarantees about the
future, some information that I came across offered by the Detroit Chamber of Commerce
gives me a measure of confidence. I don’t think the “sky is falling” quite yet.
“In 2014, more than 2.3 million cars and
trucks rolled off Michigan assembly lines – over 1.5 million at assembly plants
located in the Detroit region,” the Chamber noted.
It was also pointed
out that the state “is home to 13 original equipment manufacturer (OEM)
assembly plants and 35 OEM component plants, adding that when suppliers
are included there are over 1,700 automotive-related manufacturing
establishments in Michigan.”
Here is some other information offered by the
Chamber to consider:
--Since 2010, Michigan companies have
announced more than $20 billion in automotive investment, creating nearly
65,000 jobs.
--The state’s automotive industry has an
economic impact of nearly $57 billion.
--The state is home to 61 of North
America’s top 100 automotive suppliers.
--13 assembly plants manufacture 28 cars
and trucks in Michigan, accounting for 20 percent of all U.S. production.
--More than 45,000 automotive manufacturing
jobs have been added since 2009, more than any other state.
--Michigan is home to 375 automotive
R&D centers, 120 of which are foreign-owned.
--The state has 15 universities and
colleges with nationally ranked undergraduate engineering programs; and more
than 650 automotive-focused programs at the post-secondary level.
--Over 89,000 engineers are employed in
Michigan, a higher concentration than any other state.
--Michigan has averaged one automotive
patent per day for nearly 50 years.
When you consider all of this, along with
the news stories we’re now hearing about the emerging technology of riding
sharing and self-driving cars and transportation systems as well as more
customized manufacturing processes, with Michigan and the Detroit-based
automakers seeking to be on the cutting edge of this “tech-driven world of
mobility, the potential is exciting. The assembly line of the future will be
(and already is) vastly different from that of an earlier generation.
* * *
I realize that in this day and age you
can shop for whatever “expert opinion” supports your view, but the one I give
credence to stated that allowing GM and Chrysler to suffer their respective
fates without any governmental assistance would have most likely ended their operations, taken down numerous auto suppliers with them,
and that Ford, without those suppliers, could have failed as well. In addition,
a lot of workers would have been looking for new jobs.
When I think of
what the aftershock of this crash would have done to many of our small
businesses in Michigan, mine included, I still shudder. Also, I’m nostalgic
enough that I like to see the logos of those three brands on the marquees of
auto dealers and on the emblems of passing cars and trucks.
Few people, if any, could have foreseen what
dire straits awaited the auto industry and Michigan back in the year 2000 when
the workforce hit its peak of 333,000 and the smooth sailing seemed probable.
Likewise, in the dark days of the Great Depression, predicting record car sales
and robust domestic automakers within a few short years would have seemed
fanciful. (I don’t recall anyone doing so at that time.)
The way forward? Well, who knows? But we
still have a strong foundation in the auto industry and in other sectors of the
economy to build upon. There is cause to celebrate and a case to be made for
confidence and even optimism. Personal circumstances, as I noted, influence our
individual judgments, but I don’t believe that Michigan is a train wreck or
that the country has gone to hell in a hand basket.
There’s always
room for improvement and reform. We have structural issues in our economic and
in our society that need to be addressed. Too many Michiganders, in particular,
and too many Americans overall are falling behind in their incomes and future
prospects. The income disparity is going in the wrong direction between the
extremely wealthy and the rest of us. The middle class, the great strength and
stability of our nation, is shrinking.
We have challenges
in training workers with adequate skills and in better educating our young
people. While we need to create more hands-up and fewer hand-outs, we still
need to maintain an adequate safety net for those who have lost their jobs, who
face the obstacles of escaping poverty, and who fall into economic tough times
due to an illness or family breakup.
I believe that
civility to each other and compassion for others is the foundation upon which
we, as a state and a nation, can erect that reform and improvement. Building on
the strengths we already have, working together towards common goals, and seeking to
broaden our prosperity for as many people as possible seems to me the best way
forward.
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