Ohio’s Economy, Heavily Invested in Auto Jobs, Will Suffer Further from GM Woes

OhioNewsBureau

By John Michael Spinelli

COLUMBUS, OHIO: When President George Bush Tuesday said at a White House news conference on the economy that things were hardly as bad as some thought but actually pretty good from his vantage point, the blame Ohio Gov. Ted Strickland and Democratic presidential contender Barack Obama pinned on Washington in comments each made in the wake of today’s announcement by General Motors that it is again reducing labor costs and making addition production cuts appears accurate, in part, even though GM itself has a lot of explaining to do, as its attempts to bolster its liquidity to fend off further operational cliff diving continue.

General Motors, writing in a media release on its corporate Web site, said it would reduce labor costs for salaried workers by 20 percent, eliminate its quarterly dividend and further reduce truck production to ensure that it has enough cash to finance its turnaround for at least two more years.

The scramble for operational breathing room includes selling at least $2 billion in assets and borrowing as much as $3 billion, both of which are expected to raise about $15 billion by the end of 2009, its chief executive Rick Wagoner, said in published reports.

The one-time giant auto maker whose fortunes presaged the fortunes of the nation itself, said it would also stop providing health care coverage to salaried retirees at age 65, offer them buyout and early retirement packages to reduce its salaried work force and freeze base pay for salaried employees through 2009. Furthermore, G.M. executives will no longer receive discretionary cash bonuses. The company has about 32,000 white-collar jobs in the United States, down from 45,000 in 2000. It has already eliminated more than 40,000 hourly jobs through buyouts and early retirements since 2006. How many of its white-collar jobs are in Ohio could not be determined for this story.

Commenting on production reduction, GM officials said the company would eliminate a total of 300,000 units of truck production capacity by the end of 2009, double the reduction it announced just six weeks ago. The additional cuts will be achieved both by closing some plants sooner than previously plans and through other steps not detailed. Wagoner informed company shareholders at its annual meeting last month in Delaware that four plants – one of them is in Ohio – would be closed, as it transitions from poor-selling, gas guzzling trucks to its new-era, energy hybrid, the GM-Volt, portions of which are made in northeast Ohio.

Strickland Tells ONB to Look to Washington for Answers

Gov. Strickland reacted to GM’s announcement today, saying he is concerned with the news. “More disturbing, though, is that this is but the latest example of the failure of the national leadership to recognize the challenges facing the American economy,” he said in a written response to a question posed to him by the OhioNewsBureau. In particular, he said, “the rising price of energy is hitting Ohioans squarely in their pocketbooks and causing significant economic uncertainty for businesses large and small.”

With one in six jobs in the Buckeye State related directly or indirectly to auto manufacturing, efforts by once-formidable auto giants like GM to cuts costs by cutting jobs or reducing production capacity will only further the already sour economy that bedevils it, causing state leaders like Strickland, his development officials, state lawmakers and local county and city officials to wonder where the next leak is coming from and if they have the resources to plug it up until the tide of recession abates.

Obama Chimes in with Strickland on GM Woes, Solutions

In lock step with Strickland’s quick reaction to hearing that the gathering storm clouds from GM announcement today will bring unwanted economic weather to Ohio, Sen. Barack Obama, the Illinois senator who is expected to lead the Democratic ticket for president in the general election, issued another stinging rebuke to President Bush in Washington. Calling for real change in Washington, as Strickland, now squarely behind Obama, did, Obama pointed to the loss already of 3.5 million manufacturing jobs and said he has a plan to revive it and, by extension, other companies who are facing impediments to success like “the crippling impact of high health care costs on our manufacturers…standing up to our trading partners when they manipulate their currencies and fail to abide by the same trade rules that American workers and companies live by…and having a President who understands that we have the best workers and best companies in the world.”

Feeling the company’s pain, Obama said such signs of distress are a “sober reminder of the difficult economic times we're facing and of why we need change and a new direction in Washington.” He said his “heart goes out to all the workers and families in Michigan and across the country who will be affected as well as those who have been impacted over the last few months and years of turbulence in the auto industry,” a comment Ohio GM workers will digest as they continue to explore whether their fortunes and that of the company will be better off under Obama or his rival, Arizona Sen. John S. McCain, the presumptive Republican candidate for president.

While Obama aptly noted that American auto workers are “the backbone of our economy” and will produce the “next generation of clean vehicles” that will “strengthen America’s competitiveness and create up to 5 million clean energy jobs here in the United States,” he made no mention of the failure of auto company leaders like Wagoner and others to have already produced energy efficient vehicles instead of the long lines of big, inefficient vehicles that they said were the kind of vehicles American’s wanted.

Obama’s statement said he’s been in talks with CEOs of both GM and Ford, two companies he says are “facing a perfect storm of record gas prices, rising steel prices, a credit market contraction that has made it more difficult for consumers to purchase autos, and a weakening economy that has shed jobs for six straight months.” In the chain reaction that spreads from one supplier, small business and community when another auto manufacturing jobs is lost, Obama’s comments will hit home with Strickland in a big way. Ohio has lost nearly 280,000 manufacturing jobs during the Bush White House years, so it’s little wonder that state executives like Strickland feel that Washington policies are more to blame than their individual states, which have few resources and no magic wands to resort to when sour times collapse into bad times.

Obama said he has “complete confidence that GM and our other auto companies will adapt and thrive in the 21st century economy if we bring real change to Washington and forge a true partnership together.” Government figures show Ohio is one of four states that have lost more than 40,000 jobs due to trade policy, between November 2002 and September 2007. Moreover, during that same period, the state lost more than 105,000 manufacturing jobs. Ohio, Michigan and Rhode Island remain three states that have fewer jobs today than they did when the recession of 2001 ended.

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