Up North auto suppliers

June 21, 2009

Up North Auto Suppliers...
Going, Going, but Not Gone

By Anne Stanton 6/22/09

When I emailed a friend I was working on a story about manufacturing, he
wrote: “How long does it take to say ‘there is no manufacturing left in
Northern Michigan?’”
“Ah, but you’re wrong,” I responded.
“I wish I was wronger,” he wrote.
Is manufacturing dead in northwest Michigan?
In point of fact, there were 8,107 manufacturing jobs just last year in
Antrim, Benzie, Leelanau, Grand Traverse and Kalkaska counties, according
to the 2009 Economic Forecast prepared by the ?Northwest Michigan
Council of Governments.
In Emmet County, there were 1,065 jobs in the third quarter of 2009, and
in Manistee, 854 (these numbers were taken from a different source, and
include only jobs that were covered by unemployment insurance.)
The story behind these numbers involve small manufacturing companies
tucked away in manicured business parks. Some make products that are
nearly impossible to explain in a few sentences; others get huge amounts
of media, of which local residents are unaware.
But, in general, these are dark days for those manufacturers that solely
depend on orders from auto companies. Most area auto suppliers are either
dead or hanging on by their fingernails, especially now that General
Motors and Chrysler shuttered their plants for up to three months
beginning in May.

HIT LIST
Here’s the rundown (not inclusive) of manufacturers that are out of
business or threatened, according to Rob Naugle, the international
representative for the United Auto Workers union:
• McLaughlin Company, which made fasteners for Lear, Dura and the Big
Three, moved operations to China three years ago after 20 years in
Petoskey. The UAW negotiated a severance package for the 36 employees with
the new owner, but he declared bankruptcy and never paid up, Naugle said.
• Dura Automotive in Mancelona closed a year ago, with 300 employees on
staff. At the time of closing, the average employee was earning less than
$14 an hour.
• Great Lakes Trim in Williamsburg has 14 people on staff, down from 90.
“It’s day by day right now, depending on which plant will be idled. Next
week, we could call back more people or lay off more people. Depending on
what they shut down permanently, will affect us permanently,” said quality
manager Al Koester.
• Cooper Standard in Gaylord employs 50 people in a one-shift operation,
down from 150.
• Lear, a stamping facility in Traverse City, employs 38 people, down from
135, and was expected to file bankruptcy on June 18.
• Tower Automotive in Traverse City shut down completely on June 1 with
four employees left to sweep up. It made steel brackets for auto
companies.
• Eagle-Picher Automotive in Traverse City has 80 people working out of
140. It was bought by Metavation in December of 2008; the new owners have
refused to honor the terms of a previously negotiated union contract,
which the UAW is contesting.

Naugle said people shouldn’t be too quick to blame the union until they
hear details. In the most recent closure, Tower Corporation wanted each
worker to give up $8.60 an hour in wages and/or health benefits.
“Mind you, they were only making $25,000 to $35,000, so that would take
them down by $17,000 a year. The company’s making over $10 million, and we
gotta’ turn around and keep giving. The members voted, let them close it.
There were only two who voted otherwise. The other 318 said piss on it.
The corporation has a lot of nonunion plants and plants overseas, and they
want to get everyone on the same level.”

TROUBLE ALL AROUND
Even non-auto related companies are struggling, he said.
“Honeywell in Boyne City is in aerospace, and they’re in trouble. They’re
reducing work weeks to 36 hours and are laying off—60 out of 100 are
working. Cone Drive, which has nothing to do with automotive or
aerospace—they do big gear sets—are going to one week off, three weeks on,
and they have 50 people working. It’s usually about 80.”
Naugle said area auto suppliers are facing a very challenging year.
“Our trucking costs are higher so far up here, and all of the companies
have open capacity downstate, so they are looking to consolidate. They are
always looking at us—do we really need to keep them up North? They’re
looking to consolidate, and they always have.”

IS THE WORST OVER?
Deb Vogel is a glass half-full kind of gal, and she thinks the worst might
be over.
Vogel is the business services coordinator for Michigan Works, and
oversees an online “talent bank.”
Chrysler shut down all of its plants on May 4 to keep its inventory
under control. Now that the car inventory is shrinking, Chrysler plans
to restart seven or eight of the plants by June 29. But then it will
shut down again for two weeks beginning July 13, as part of its
traditional summer shutdown, according to an Associated Press report.
General Motors shut down 13 assembly plants on May 4, with plans to reopen
on July 17. The company’s normal summer shutdown is the last week of June
and first week of July.
“Even if unemployment is 14 percent, there are 86 percent of people
working. None of us know if the worst is over, but we have a little sense
it is. Generally, what I see in manufacturing is that those who have
survived the downturn will continue to survive.
“We have seen employers do some innovative things,” Vogel adds. “Prior to
this, there would be an elimination of positions, which has happened to a
certain degree, but now they’re really running lean in all senses of the
word. They’ve streamlined their processes, gotten rid of areas that aren’t
profitable, they’re right-sized in terms of the payroll, but things are
still slow.
“A lot of companies are doing rolling layoffs in which everyone shares in
the pain—maybe the full factory is laid off for a week. We never saw that
before, but I think it’s a creative way to keep people on the payroll. We
see the real bonus that health care benefits are kept in place. That’s a
real issue. I see everyone thinking outside the box of how we’re going to
get through this reduced volume of work. I see a lot of people managing
it. That isn’t to say, we don’t see pain out there too.

SCALING BACK
Speaking of pain, there are the personal stories of foreclosures,
bankruptcies, stress, credit card debt, and marriages that have cracked
under financial pressures. The notices in the daily newspaper are edging
out want ads.
Ted Roney considers he and his wife fortunate to be working. His wife was
recently called back to her painting job after a six-month lay-off, and
he’s still on the job at Alco Tec Wire Corporation in Traverse City,
although his paychecks are smaller than a year ago. Alco Tec makes
aluminum products for the auto companies and—fortunately—a wide range of
other companies.
“We supply everybody everything. The wire that holds the Morton salt
spout, aluminum baseball bats, lawn furniture, the shiny side of potato
chip bags, you name it,” he said.
Roney stumbled into the job 10 years ago, and said it’s the best he’s ever
had. Sales were strong up until last November when the company felt the
effects of a struggling worldwide economy. Alco-Tec coped by offering
short-term voluntary lay-offs to its employees for six-week intervals.
“Our orders just started to pick up in the last three months, but it’s not
monumental at all,” he said.
Roney is adapting to reduced paychecks in a unique way by renting movies
at the library instead of the video store and entering contests.
“Contests! You name it, chances are I’m registered. Radio, TV, Internet.
I’ve usually got three or four games going at any one time. There’s never
a shortage of gift certificates from local restaurants. It’s a lot of
fun.”

MIXED FEELINGS
Bill Wressell’s last day at Tower was on June 1, and he has mixed
feelings. “Lots of good memories, but blood, sweat and tears, too. No more
ear plugs, steel-toed shoes, and safety goggles.”
Wressell is anxious to explore his career options and take advantage of
state-funded job training. But he’s not panicked. His cost-of-living is
low, thanks to no debt and low rent on his home near the airport.
“I was kind of freaked out at first, but my wife still has a job as the
manager at Big Apple Bagel and Michigan’s unemployment (benefits) will be
a huge help. But I don’t want to drag my feet. I just turned 50 in
December, so it will be a little tough getting into the work force. I’ll
be at the bottom of the pole, but that’s all right.
Wressell said his 25 years at Tower was a “pretty good ride while it
lasted.” But the ride ended last summer when gas prices skyrocketed.
“We were the most profitable of all the Tower satellite shops in the auto
portion, but they shut us down due to transportation costs. Most of our
product was being sent to the huge Toyota facility in Bardstown, Kentucky.
They thought they were going in the right direction when they decided in
September to shut us down, but from what I’m hearing, they now think they
jumped the gun.”
He believes that gas prices also affected consumer demand for cars. “From
a customer standpoint, people had to spend their extra cash on gas, which
used to go to house payments and car payments. That bogged everybody
down,” he said.

GM DOOMED?
Unless the car companies seriously restructure the way they are managed,
they won’t make it, predicts Mike Mulcahy, a Traverse City-based auto
company consultant.
“I think they’re doomed. I think Detroit is going into a black hole for 10
years,” he said.
Two things have to happen, Mulcahy says. Auto company CEOs must be
compensated for long-term performance, the same way the CEO of Toyota is.
“The CEO at Toyota is thinking 15 years out, and the CEOs of GM have been
paid to think one year out. And that’s been going on for 40 years. The
results are absolutely predictable and inevitable,” he said
“As soon as a strike was threatened, it starts chewing into the
president’s annual bonus. He watches the gas leak out of the tank. He has
a motive to stop the strike right away at any cost, or he’s not going to
get a bonus. Toyota and Honda are all unionized, but their CEOs take a
longer perspective to getting things straightened out,” he said.

THE UNION EQUATION
Which brings Mulcahy to the other side of the equation, which is making
union workers part of the solution.
“It goes back to Henry Ford. He hired immigrant workers. When they showed
up, they didn’t speak English at the time. He told them, ‘You are not here
to think. I didn’t hire your mind. I hired your back. Obey the rules
exactly and everything will work just fine.’
“This is a horrible way for a human being to be employed, and that
philosophy has absolutely carried through,” Mulcahy added. “Billy Ford
would be horrified to hear me say this, but in a candid moment, he’d say,
‘You’re right. We really have bungled this. Human capital is the most
valuable thing a company could have and we have this monster history going
back to the 1950s where there was gunfire going back and forth. Guys
smashing things and tying a nut inside the interior of the car. Malicious
things done by the union.
“This would never happen in a Toyota plant. Fifteen years ago, 60 percent
of the take-home pay of a Toyota worker was profit-sharing. Put that in
your pipe and smoke it for a minute. The employees are always coming up
with ways to save money. They are economical and frugal because it’s their
money.”
Will the union’s partial ownership of GM help?
“I say good luck to them. They’re down to rooks and a knight, and if they
can pull the rabbit out of their hat, great.”
Mulcahy said that the recent stock price of General Motors offers a dismal
insight.
“If you take all the outstanding shares and multiply them by the stock
price, it gives you a crude valuation of the company. Right now—as of last
Friday—$300 million would have bought every outstanding share of General
Motors. You could have rounded up your richest friends and bought the
company. To buy Toyota on the same day, it would have cost you $124
billion. Honda, $107 billion, and Ford was $17.8 billion.”

SPEED IS OF THE ESSENCE
A multitude of problems need to be quickly solved to save the few
surviving auto suppliers, and it depends on a lot of ifs.
• If they can survive severe cash flows caused by the shutdowns, not to
mention GM’s slow payment plan (there’s at least a 45-day lag between
shipping parts and getting paid).
•  If summer shutdowns are short.
• If Americans start buying new cars, which are made with a much higher
percentage of domestically made parts than foreign models.
• If the suppliers can adapt their products to non-auto companies.
• If the bankruptcy proceedings of GM and Chrysler proceed quickly.
• If the parent company doesn’t close down the local plant to save
transportation costs.

“The name of the game of bankruptcy is speed and to be able to go far
enough with sweeping changes. If someone has surgery to remove growth of a
tumor and only take half of it, that’s not going to save the person,” said
Bill Marsh, Jr. of Bill Marsh Family Auto Mall in Traverse City.

Editors note: Next week Express will publish a report on area
manufacturing firms that are thriving, or at least, surviving.


Business is Booming...
for Disability Examiners
“Business is really, really booming.”
So says John DeSpelder, who has put all of his Social Security disability
claim examiners in the Traverse City office on mandatory overtime.
“I think everybody who works here understands what’s happening in the
economy and are doing the best job possible and quickly as possible. We
often talk about our mission, and that’s to protect people who are the
most vulnerable, whether it’s children or adults.
“… This is statewide for the state of Michigan, and the number of
disability claims is up 15 percent compared to the same time last year,”
DeSpelder added. “That’s big, and we’re limited in our capacity to handle
claims. We’ve kind of hit the wall. The number of cases awaiting a
decision is up 53 percent over the same time last year.”
The profile of people have changed in the last several months. Instead of
a serious illness, heart attack or traumatic injury, the applicant might
be older and have suffered for years from chronic problems, such as a back
injury. While their old employer might have tolerated the problem, no one
else will.
“It makes it unrealistic for them to find a job somewhere else,” DeSpelder
said.
To qualify for disability, a person, in most cases, has to be disabled
from work for at least 12 months, although they’ll know sooner than that
if they qualify.
How do they survive for 12 months if they can’t work?
“That’s very difficult for people to do,” DeSpelder admitted.