Shrinking auto giant pains Ohio,More bad GM news likely Monday

Shrinking auto giant pains Ohio
More bad GM news likely Monday

Sunday,  May 31, 2009 3:38 AM

THE COLUMBUS DISPATCH

 

 

General Motors’ assembly plant in Lordstown, upgraded in 2004, is one of six GM plants still running in Ohio. On Monday, one or more of those plants might be told it’s closing.

For the auto industry, this is the year when the unthinkable has become routine.

 

And the latest blow might be the worst of all: General Motors has indicated that it will file for bankruptcy protection on Monday and give details on the latest and largest round of plant closings.

"We’ll probably continue to see a GM presence in the country, but it’s going to be a whole lot less," said James Newton, chief economic adviser for Commerce National Bank in Columbus.

GM’s decline already has produced many casualties in Ohio, including workers who lost their jobs at the parts plant on the West Side during the past decade.

The company’s Ohio work force has dropped from more than 60,000 in the mid-1990s, to about 10,300 today. The most recent major setback was at the Moraine assembly plant in the Dayton area, which closed permanently right before Christmas.

Although GM hasn’t been the state’s largest private employer for years — that distinction now belongs to Wal-Mart — the automaker has more workers in Ohio than anywhere but its home, Michigan.

For Ohio, the question is, how much longer will this downturn last? And what will the state’s manufacturing economy look like afterward?

The depth of the collapse has been "incredible," said Eric Burkland, president of the Ohio Manufacturers’ Association. "For the community, it’s just devastation."

On Monday, GM is expected to name 14 plants that it plans to close, a follow-up to an earlier announcement that laid out the number but not the locations. With six GM facilities in Ohio, including an assembly plant in Lordstown, it’s likely that one of them will be on that list.

On the other hand, one might get a reprieve. GM said Friday that it will reopen a closed U.S. factory to build compact cars that likely will be the smallest vehicles it has ever produced in the United States. It didn’t say where.

The new, leaner GM will have about 30 plants nationwide, down from 47 last year, and about 38,000 hourly employees, down from 61,000 last year. That means the company will have far fewer employees in the entire country than it had in Ohio alone just 15 years ago.

The smaller company will serve a U.S. new-car market that has shrunk from about 16 million vehicles sold in recent years to a forecast of about 10 million this year.

Ripple effects

The continuing decline of GM will reverberate throughout the state, with potential harm to uncounted other businesses. In central Ohio, that includes Honda and Worthington Industries.

Honda, with assembly plants in Marysville and East Liberty, has about 15,000 Ohio employees, enough to pass GM last year as the state’s largest automotive employer.

All of Ohio’s automakers, which also include Chrysler and Ford, depend on a shared network of parts suppliers. If GM is in bankruptcy, and with Chrysler having made a similar filing in late April, some of the weaker suppliers could go out of business.

"These are big changes that are taking place in the industry, and it’s affecting a lot of companies in the supply chain," said Honda spokesman Ron Lietzke, adding that the disruptions with suppliers have not yet interrupted Honda’s production.

During the past few months, Honda has noted a doubling of the number of its suppliers that are financially "distressed," Lietzke said, and he expects the number to continue to rise. He declined to say how many of the company’s 600 North American suppliers are in trouble or how Honda defines "distressed."

Worthington, a steel processor with headquarters on the North Side, depends on the auto industry for roughly 25 percent of its sales. The automotive downturn was the main reason that Worthington swung from record quarterly profits to record losses late last year.

"There’s no question about it that this is a major disruptive force to the steel industry, including Worthington," said Christopher Plummer, managing director for Metal Strategies, a consulting firm in West Chester, Pa. He estimates that it will take at least a year for the steel industry to return to some semblance of normal.

GM’s legacy

Years have passed since GM was a major employer in central Ohio. Today, the company’s greatest local presence is in its retail franchises, and in a parts-distribution center in Groveport with about 80 workers.

To get a glimpse of the glory days, go to 200 Georgesville Rd. on the West Side. The former Delphi factory, just south of W. Broad Street, has been an empty shell since it closed at the end of 2007. Out front is a "for sale" sign that says 1.4 million square feet are available. A barbed-wire fence surrounds the complex, and weeds poke through the concrete.

GM opened the parts factory right after World War II, and it reached a peak of more than 5,000 workers in the late 1970s. Eventually, the plant was spun off to a new company, Delphi Corp., and the work force shrank until the day it closed.

Howard French, 50, of Hilliard, got a job there out of high school in 1977, when GM seemed to rule the world. He was the third generation in his family to work there.

"It was a booming place," he said.

Today, he lives on his GM pension and drives a school bus. He groans when he hears anyone refer to the burden of GM’s so-called "legacy costs," because those costs represent his ability to afford his house and his family’s health care. He groans because he earned those benefits, and because he knows that younger generations won’t have the same opportunities.

"Now you want to blame us?" he asked.

The changes at GM are part of a larger shift in the manufacturing economy.

Companies have learned to improve productivity as they reduce staffing, a change that requires a constant investment in new technology, Burkland said.

"Just underneath this is a really rigorous examination of all products and processes," he said.

He hopes the auto industry can stabilize by the end of the year.

Further ahead, he hopes Ohio manufacturers will have the resources to be ready for the market that will exist during the eventual recovery.

If that happens, he thinks the state’s manufacturing economy can be the same size 10 years from now, if not larger. That would be accomplished by maintaining a significant presence for the auto industry while also boosting other areas of the manufacturing sector, he said.

After decades of decline, any growth in manufacturing would be celebrated by business leaders and elected officials.

One of those officials, Gov. Ted Strickland, has met with GM to plead with it to maintain its current footprint in the state. The governor "remains committed to doing whatever is possible to keep GM jobs in Ohio," spokeswoman Amanda Wurst said.

Despite his efforts, and the efforts of many others, Monday might be a very bad day for Ohio.

Information from the Associated Press was included in this story.

dgearino@dispatch.com

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