Downturn revives old fears in state
By Gordon Trowbridge / The Detroit News
Michigan is officially back in the layoff business.
After nearly a decade of turbocharged profits and fat paychecks, Monday's
announcement of massive job cuts at DaimlerChrysler reacquainted workers from
Michigan's giant assembly lines to its small tool shops with the specter of the
unemployment line.
Daniel Mears / The Detroit News
At least 1,000 jobs will be cut at Daimler Chrysler's Jefferson North Assembly plant
in Detroit as the company eliminates the third shift production by mid-March,
officials said.
"Layoffs have always been in the back of my mind," said Clyde Jones, a line worker
for Budd Co., a Detroit auto supplier. "Now they're in the forefront."
For workers like Jones, already laid off once and facing another cut in February
from his job making parts for Ford trucks, each announcement of job losses brings the
threat a bit closer. But analysts said Monday that falling from the peak of automotive
acceleration to a slower pace need not spark fear of a return to the state's dark
economic past.
Economist David Sowerby predicted we'll all look back one day at Monday's news as
"not unlike an inconvenient Michigan pothole.
"We've begun to decelerate," said Sowerby, a portfolio manager and economist at
Loomis Sayles & Co. "That doesn't mean we're going to immediately downshift into
reverse."
Certainly, the announcement Monday was no surprise to those who follow the car
industry. '
In recent weeks, General Motors Corp. has announced plant shutdowns, parts makers
Delphi Automotive and Visteon said they would temporarily lay off 10,300 workers, and
DaimlerChrysler management had made clear that with financial losses mounting, the
question was when, not if, jobs would be shed.
Ripple effect starts
But until Monday, the concern hadn't been nearly so acute in places like Macomb
County's San Marino Club, where Nancy Maiani and her co-workers spent the morning
remembering recessions past.
"I'm worried," said Maiani, a Sterling Heights grandmother who was born in Michigan
in 1938 and has lived every auto-industry slowdown since. "The economy was going
great. Now it just seems like it's one thing after another. It looks bad."
It doesn't look a whole lot better from Dave Hadelman's desk. Hadelman is
vice-president of operations for Big Buck Brewery & Steakhouse, where
DaimlerChrysler's nearby headquarters tower dominates the view from the parking lot.
"We've already seen a slowdown in our sales in the last 12 weeks," Hadelman said as
the lunch crowd filed in, many wearing badges carrying the names of auto companies and
their suppliers. "It's definitely a concern."
How far the effects ripple out beyond Auburn Hills is less clear. But a number of
factors indicate that no one should brush off their recession jokes ("Last one left in
Michigan, turn out the lights") anytime soon.
Doug Rothwell, head of the Michigan Economic Development Corp., the state's jobs
agency, said the layoffs won't change state forecasts for a slowdown in economic
growth and a slight increase in unemployment this year. "If it has to happen, this is
one of the better times it could happen," he said.
A low unemployment rate means the economy can better absorb the workers cut at
DaimlerChrysler and other auto companies. Efforts to diversify Michigan's economy with
high-tech additions haven't been a raging success, but have made a difference. State
and local governments have used a decade's worth of higher tax revenues to boost
rainy-day funds, making it easier to weather a downturn without raising taxes.
Alan Lessig / The Detroit News
David Hadelman, a vice-president at Big Buck Brewery & Steakhouse in Auburn Hills, is
concerned about the slowdown at nearby DaimlerChrysler headquarters.
Union contracts help
And union contracts crafted with retirements in mind make layoffs like Monday's
entirely different from those of the '70s and '80s.
While DaimlerChrysler is trimming 26,000 jobs, it has that many workers and more
who are eligible for existing early-retirement packages, said Diane Swonk, chief
economist for BankOne in Chicago. Many could choose to leave, then look for other good
jobs.
"With unemployment so low, that's an important economic shock absorber," Swonk
said. "Even with recent layoffs, there's a lot of opportunity for these workers to try
other things."
Sowerby, the Loomis economist, forecast that the slowdown now under way would push
Michigan's unemployment rate no higher than 6 percent, up from less than 4 percent
today. Six-percent joblessness, he points out, was as good as it got in the recession
of the late '80s. "It would bring us to the (high point) of the last time we went
through a similar episode."
Todd McInturf / The Detroit News
An ominous sign is posted outside DaimlerChrysler's Trunk Plant at Mound and Toepfer.
The automaker will lay off 26,000 workers to combat falling sales.
Even at businesses peddling luxury, where belt-tightening from consumers might
first appear, the talk is of a slowdown, not a crash.
"We haven't felt it yet," said Mark Mathes, an owner of Emerald City Harbor in St.
Clair Shores, whose high-priced boats would likely be an early casualty in a
recession. The only evidence of serious trouble, Mathes said, is hand-wringing in the
media.
High-priced homes, too, are still selling.
"Nobody can question the fact that this is Detroit, and an auto downtown is going
to have some effect," said Kelly Sweeney, president and CEO of Weir, Manuel, Snyder &
Ranke, an Oakland County real estate firm. "But I don't think it's like it used to be,
when the auto industry would catch a cold and everyone else would get pneumonia."
Still, for line workers like Jones, it's hard not to worry that bad times are
coming.
"I've been working here for four years," he said. "I always thought, 'How long can
these trucks stay so hot to keep our plant so busy?' "
Not long enough, it seems, to end Michigan's fear of car companies in trouble.
