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By now you have heard that the UAW and Ford came to agreement on a new contract yesterday, and, as with the deals made with GM and Chrysler, the major components are shifting the health/retiree benefits into the hands of the unions and creating a two-tier wage system. How both of those things will work in practice remains to be seen, but the general tone coming out of the industry indicates that these contracts might be the thing that will make the Big Three competitive again- and that is good news for Michigan.
As much as the doom-criers love to blame our state government for Michigan’s woes, the truth is the auto industry still is the number one factor in our economic engine, to cin a phrase. Dana Johnson, chief economist from Comerica-
The problems are concentrated here because of Michigan’s dependence on the auto industry. Without the last few years of auto-related layoffs, buyouts, bankruptcies and downsizings, the state economy would be as healthy as any other in the Midwest.
“Virtually 100 percent of the underperformance of the Michigan economy is due to the direct impact of this restructuring in the auto business,” Johnson said.
And David Cole, shortly after the deal with GM-
“Our problem in the state is almost totally auto related,” said David Cole, chairman of the Center for Automotive Research in Ann Arbor. “In terms of things inside the industry, this labor agreement was the final major piece.”
The restructuring of the auto industry will still produce fallout through next year, as evidenced by Chrysler’s announcement of 12,000 job cuts this week. We aren’t done yet, and there will be more pain to come, but will these contracts be the catalyst that starts us on the way back up? John Gallagher from the Free Press, Oct. 28th-
Those potential positives go beyond profitable domestic automakers to include stronger real estate values, increased political clout and a leading role for Michigan in fighting global warming by creating the energy-saving, greener cars of tomorrow.
It also could mean a renewed strength and purpose for the UAW and other unions as they take on more of the burden of managing health care.
True, the experts hedge, waffle and dodge when asked for specific predictions. But there’s a growing consensus that 2007 — the year of new UAW contracts, a falling dollar that helps U.S. manufacturers and the rebirth of Chrysler as part of private-equity Cerberus Capital Management — is the long-awaited turning point for the economically ailing state.
Predicting economic performance will always be an inexact science of course; there are too many things outside of our control that can happen on the national and global stage to say for certain that we will get out of the woods based on just the auto industry- and, if we have learned anything in the past few years, it’s that we need to stop relying solely on the auto industry as the answer to our problems.
Sure, they will always be a big part of our state’s economy, and we want them to be a big part of our state’s economy- but we need to diversify.
And we need to start now.
More over the flip…
wizardkitten :: Hope for the Michigan economy
Looming in the background, heard uttered more frequently in news reports of late, are the words “national recession”- and that has the potential to derail the progress that we are making. Auto sales drop again, and we will be headed for bigger trouble. All the balanced state budgets and competitive auto contracts won’t mean a thing in the face of that, but, they sure will help deflect the impact should it occur.
If the national housing crisis and credit crunch continues to spread, the U.S. economy would weaken and might even drop into a recession. In that case, Michigan’s automakers would be forced to cut even deeper, noted Don Grimes, a professor at the University of Michigan’s Institute of Labor and Industrial Relations.
“The risk is if we really get a downturn in auto sales,” Grimes said. Current total U.S. auto sales are expected to stay between 16.5 million and 17 million vehicles, he says, but a stricken national economy would cut that number quite a bit.
“I’ve seen estimates that put sales down in the 15 million range next year,” Grimes said. “If they fall off that way, we could get hit again.”
The answer? Diversify.
Jobs are going begging now. We focus on the high unemployment in Michigan, but we are ignoring the fields that are growing and looking for workers.
At the same time, Michigan has been adding lots of new jobs in several non-automotive fields, including health care, education and tourism. Some fields, like nursing, are growing fast enough to suffer serious shortages of workers.
Makes you wish we had started investing years ago doesn’t it? Still, we have the tools to start now, if we are wise enough to pick them up and use them. The No Worker Left Behind program and others like it can help fill these jobs with the training they provide. College education will still be the crucial factor.
The new state budget didn’t cut education funding, thankfully, and overall it will certainly help put us on solid ground, perhaps paving the way for future education investment as we get the house in order.
Mitch Bean, director of the House Fiscal Agency, said the state’s finances are on their strongest footing in nearly a decade, but he cautioned a national economic downturn could unravel everything.
“Nobody can look at this budget and say it’s not structurally sound, because it is,” he said.
And our tax rates are still competitive for business and entrepreneurs, as evidenced by a new study that ranks us 6th in the nation as a “business friendly” state in the terms of a place to look to start your new venture.
In essence, it is a comparative measure of economic incentives relating to government policies: the lower the “Small Business Survival Index” number, the greater the incentives to invest and take risks in that particular state.
So, all the pieces are there. We are setting a strong foundation. A healthy auto industry, combined with educating our workers, investing in new growth industries such as alternative energy, high-tech manufacturing and especially health care, and a state fiscal climate that provides for its citizens at the same time it encourages new business ventures, and we are certainly can be on our way to prosperity again.
The one thing we have to hope for is that we avoid a national recession now. Keep those fingers crossed, say your prayers, and work your mojo, whatever it takes. We will get there yet.
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