Ann Arborites feel the industry's pain
From the August, 2009 issue
Marcie Greenfield worked for Chrysler for more than twenty years, most recently commuting from Ann Arbor to Auburn Hills, where she managed product development research. But two years ago, at age fifty, she was laid off--with emotional and financial consequences so painful she compares it to a divorce.
"It stresses us out every day," says Greenfield, whose husband, a systems engineer, also was unemployed for a while. The couple, parents of five-year-old twins, balanced their budget by cutting out plays, massages, movies, and vacations.
Greenfield knows others have it worse. "I get together with a group of retired Chrysler secretaries, and they're all having a hard time," she says. "One woman--she was an executive secretary--applied to Costco, and she can't even get a call back."
For generations of Michiganians, a job at an auto company was a ticket to prosperity. Pay and benefits were so good that a Ford exec used to tell new hires that they'd boarded the greatest gravy train in history. GM employees affectionately called their company "Generous Motors."
But that was before Chrysler and General Motors went bankrupt. Just as the automakers used to spread jobs and wealth beyond the Motor City, their catastrophic decline now is punishing the entire region.
Thirty years ago, 18,000 people worked at GM's Willow Run factories, building Chevy Citations and Hydramatic transmissions. The assembly plant closed in the early 1990s, and the Powertrain transmission plant is down to 1,300 jobs--which will disappear when it closes next year. In Ypsilanti, the Ford parts plant off I-94 shed nearly 1,000 workers before it shut down last year. In Chelsea, 700 people worked at the Chrysler Proving Grounds in 2004. Now just 400 are left, awaiting new owner Fiat's plans for the 3,850-acre complex.
Disappearing auto jobs helped drive Michigan's unemployment rate to 15 percent in June, the worst in a generation. In Ann Arbor, the rate hit 9.7 percent in May, with 5,900 people out of work. U-M economic forecaster Don Grimes predicts even
more people will lose their jobs in the coming months as laid-off workers leave the area and retirees who've lost benefits rein in their spending. Grimes' own family canceled its reunion this summer, because some relatives are hurting financially.
The job cuts savaged the United Way of Washtenaw County--donations from the auto sector plunged from $2.1 million in 2001 to just $600,000 last year. According to county treasurer Catherine McClary, GM currently pays about $715,000 a year in property taxes on its Willow Run operations, payments that are likely to dwindle after the transmission plant closes.
Fortunately, no local car dealerships are among the nearly 2,000 that GM and Chrysler plan to eliminate. But with vehicle sales down 40 percent from two years ago, they, too, are being squeezed.
So far, Jim Bradley Pontiac-Buick-GMC is more affected by the economic downturn than by the GM reorganization, says owner Bill Perkins. "Business has been OK for us. We're not setting the world on fire," he says, but the dealership still is profitable.
Perkins has even seen a spike in Pontiac sales as loyal customers come in to buy their final G6, G8, or two-seat Solstice. Things will get harder once GM discontinues Pontiac, which represents about half of the dealership's revenue. Perkins hopes customers will switch over to Buicks or Chevrolets.
"There's still a lot of people who want to buy cars," Perkins says, but many cannot obtain financing. Yet with GM shutting down its factories for most of the summer, he also worries that dealers won't have enough new cars to sell this fall. Until that gets sorted out, he's considering selling more used cars.
Even the University of Michigan is not immune to the problems of the auto companies. Just two years ago, GM gave the university $2.5 million in donations and funding for research. This year, through June 5, it has given only $48,000. Ford and Toyota's contributions have declined too, though not nearly as precipitously, according to an Observer analysis of university data.
GM was among the top ten corporate donors to the university, so "it hurts a little bit," says Daryl Weinert, executive director of the U-M's business engagement center. But the greater loss, Weinert says, is "the fact that they're not here hiring. GM and Ford have always consistently been in the top five for recruiting Michigan engineering students. They're not even hiring at this point."
Grimes of U-M warns: "This gets to be a real mess, with lots of potential for bad things to happen. Everybody I know is battening down the hatches."
Some 8,700 United Auto Workers members live in Washtenaw County, and 4,000 of them still had jobs at Ford, GM, or elsewhere as of Jan. 1. That number is sure to shrink as the plant closings continue. At the other end of the pay scale, Ann Arbor is host to some top executives, including Bill Ford, Jr., and former General Motors VP Marina Whitman.
Once GM's chief economist, Whitman predicts that the Willow Run closing will have a "spillover effect" on Ann Arbor and its businesses.
"It's not the bankruptcy action itself," says Whitman. "It's what it signifies." Nationally, it underscores GM's diminution as a business. Regionally, it means "the devastation of the Detroit area," she says.
Along with other GM white-collar retirees, Whitman lost her company-paid health insurance last year. Bob Lutz, a Freedom Township resident who's been a top exec at Ford, Chrysler, and GM, has seen his Chrysler pension cut. And even the Fords are a lot less rich than they used to be: they're heavily invested in their company's stock, which a decade ago was worth $30 a share. After plunging to less than $2 last winter, it's lately been trading at around $5 or $6.
Farther down the ranks, the losses hit harder.
Tony Sercel says he took "a helluva beating" on his GM stock. During a long career as a "loyal supervisor" at a plant in Euclid, Ohio, Sercel bought 2,000 shares. "If I would have sold it five years ago, I would've got 100 g's," he says. But he took his late wife's advice and held onto what was long a blue chip stock. With the bankruptcy, "It's worthless now."
At least Sercel, who moved to Ann Arbor after his wife's death to be near his scientist son, still collects his GM pension. White-collar retirees from Delphi, the parts supplier spun off from GM ten years ago, may not be so lucky. While GM and Chrysler each passed through bankruptcy in less than six weeks, Delphi has been in bankruptcy since 2005.
GM has said it will fund the pensions of Delphi's blue-collar workers--but not its salaried retirees. If Delphi's white-collar workers have to fall back on federal pension insurance, some could see their incomes cut in half.
Chrysler's retirees fear the same fate. Ann Arborite Tom Hoskins says they began to organize even before the bankruptcy, and the drive picked up steam as the auto companies went into free fall last autumn. The National Chrysler Retirement Organization (NCRO)--whose members include former Chrysler chairman Lee Iacocca--began lobbying politicians and the press. It also hired what Hoskins describes as a "phenomenal" Chicago law firm to represent the retirees in the bankruptcy.
Ann Arborite Victor Randolph worked for Chrysler for thirty-two years, most recently in quality control. In a long, passionate email, he recalls how he "gave constant unpaid hours" to the company, taking on the work of other people who left and weren't replaced. He'd drive to Chrysler plants around the Midwest, work into the night troubleshooting problems, then sleep in his car on the way home to save money on motel rooms. Randolph is particularly anguished because during this time, his young son died of a mitochondrial disorder. "There is no time store!" he writes. "There is no place where I can go to get back the unpaid days and evenings sacrificed away from my family."
Randolph feels Chrysler's downfall can be traced to a culture where the "bean counters" replaced the "car people." And when the crash came, he says, blue-collar workers were better protected than white-collar workers like himself. So it's all the more impressive that the NCRO won a major victory in the Chrysler bankruptcy: Randolph, Marcie Greenfield, and twenty other Ann Arbor NCRO members breathed a collective sigh of relief in June when they learned that their pensions appear to be safe.
"We were destined to be the next big losers," says Detroit-area NCRO leader Chuck Austin. "Two things saved us--the federal loan guarantee program and our own efforts."
At St. Francis of Assisi Catholic Church on Stadium, the congregation and staff have "really geared up" in the last six months or so to offer more assistance to people squeezed out by the auto companies, says Father Jim McDougall.
McDougall says attendance is down by about 100 to 150 people. He thinks that's because more people are leaving Ann Arbor to find jobs elsewhere with "very few new households coming in."
McDougall says giving has fallen about 4 percent in the last year, which in his congregation of 7,000 means about a $120,000 decline. The church is cutting costs, and staff have not had a raise for two years.
"I don't think it's going to get any better," McDougall says. "We are planning for a recession economy for at least another year, most likely two years....This has shaken us again and reminded us that we're going to see a lot of difficulties and better be prepared to deal with that."
The U-M, too, is reaching out to the unemployed. When the Alumni Association started offering free career counseling sessions in April, the sessions filled immediately, says association VP Dave Schuler. In May, a 140-person "Wolverine Career Boot Camp" was filled to capacity--and two-thirds of the participants were jobless.
In the past, many people squeezed out of the Big Three got jobs at smaller companies that did contract work for them. But those firms, too, are taking a big hit, and some will have to scramble to survive, says Dennis Virag, president of Automotive Consulting Group in Ann Arbor. Ann Arbor market research, public relations, software, and IT support companies all are feeling the pinch, Virag says. But he also believes that in a year or so, those that survive may start picking up some new business.
Virag expects demand for cars and trucks to grow smartly in 2010 and 2011 as the economy recovers and consumers catch up on deferred purchases. Yet he expects GM and Chrysler to be cautious about hiring new staff. "When the rebound does come, they'll need a significant influx of assistance," he predicts. And that, he says, will be a "tremendous opportunity for companies of all sizes."
Marcie Greenfield doesn't plan on waiting for the recovery. She recently launched a company, Savor Ann Arbor, to lead walking tours and food tastings at local stores and restaurants. As for Chrysler, she says, "We watched this great company of ours get run into the ground."
[Originally published in August, 2009.]