GM Plan Certain to Force Cities to Fight for Plants : Economy: The Arlington-Ypsilanti battle is heating up and more such high-stakes encounters are inevitable.
It didn’t take long for the pleading to begin. A day after General Motors announced it would close either a factory in Arlington, Tex., or one in Ypsilanti Township, Mich., Texas Gov. Ann Richards was trying to get GM Chairman Robert C. Stempel on the phone.
Stempel was closeted at the White House with President Bush on Thursday, so Richards apparently did not get through. But she will, an aide says. The stakes if the Arlington plant shuts down: a loss of $341 million annually to the Texas economy and another blow to the hardest-hit county in the Lone Star state.
“Arlington in GM Plant War,” declared the Ft. Worth Star Telegram.
Meanwhile, 40 community leaders were hastily gathering at the Ypsilanti Area Chamber of Commerce just west of Detroit to plot their own strategy. Tax breaks, training funds, legislative aid--whatever it takes.
A blue-collar region with five auto plants and the nickname “Ypsitucky,” a nod to the Kentucky origins of many of its residents, Ypsilanti already lost between 12,000 and 14,000 auto jobs during the 1980s. It cannot handle much more.
“I don’t believe any state in the nation can compete with us,” declared Kirk Profit, a state representative from Ypsilanti Township.
“Whipsaw” is the term being used by critics to describe the competition that GM has created between the two cities and states, both reeling from a recession, hard-pressed for jobs and facing massive budgetary problems, much like GM itself.
Although GM denies that this is its intent, a high-stakes industrial contest is the inevitable result of its disclosure Wednesday that the two assembly plants--which build identical cars--will be consolidated into one. Which plant survives will be decided in the next several months.
GM’s unprecedented retrenchment calls for padlocking 21 plants, 19 yet to be named. The action is sure to have 19 mayors--from Doraville, Ga., to Oklahoma City--arriving at GM’s door, hats in hand.
“I think they want 19 little Saturns,” says Daniel Luria, an economist at the Industrial Technology Institute in Ann Arbor, Mich., referring to the intense bidding for GM’s $3-billion Saturn manufacturing complex, which ended up in a Tennessee cornfield. “This is a fiscal shakedown.”
Stempel said that he has not decided which plants to close and that he intends to weigh the needs of the communities most likely to be targeted, among other factors.
But skeptics suggest that a city can best demonstrate its “need” by giving GM whatever it wants in tax abatements and the like. Local officials, however, take the well-liked Stempel at his word; if the measure is which city needs the jobs the most, it will be a tough call in the case of Arlington, Ypsilanti and many of the other competitors that emerge.
Such competition among communities has become deeply ingrained in the art of industrial development, but usually the practice centers on luring new factories to a city or state. Nine cities are currently bidding to become the site for the production of McDonnell Douglas’ proposed next generation jetliner. And just last week, Anaheim beat out Long Beach as the site for a new themed resort to be built by Walt Disney Co.
It has been a time-honored practice in the automobile industry, and has included such epic, costly struggles as Pennsylvania versus Ohio in the 1970s for a Volkswagen assembly plant that closed a few years after it opened.
Japanese auto producers played state and local officials like violins throughout the 1980s in erecting eight U.S. assembly plants across the Midwest. And nearly 40 states entered the bidding for the Saturn complex.
But in an era of industrial contraction, the more realistic prize often is maintaining the status quo. The Arlington-Ypsilanti standoff recalls an episode that has become part of Rust Bowl lore: a feverish 1982 battle between Ft. Wayne, Ind., and Springfield, Ohio, over which city’s International Harvester truck plant would stay open. Ft. Wayne lost.
Although some are critical of the process, Tony Caprarese, president of the Ypsilanti Area Chamber of Commerce, is more philosophical:
“I don’t like communities being whipsawed against each other. I don’t think either community deserves it. But as a company, I don’t think GM deserves everything that’s happening to it, either. I think trade policy and other things have hurt. But this is part of the American economic situation. We’ll do everything we can, and then life goes on.”
Arlington, population 270,000, lies between Dallas and Ft. Worth and is better known as the home of the Texas Rangers baseball club. But the city grew up around the GM assembly plant, which was built in the early 1950s and is now in the center of town.
“We were set on our course by the opening of that plant,” says Mayor Richard Greene, a Chevrolet dealer. “It’s an essential part of the fabric of our community.”
Of 30,000 jobs permanently lost in Texas this year, more than 15,000 vanished in Arlington’s Tarrant County, says spokeswoman Kathy Schwartz of the Texas Department of Commerce. They resulted from the closure of Carswell Air Force Base and a General Dynamics plant and cutbacks at LTV and Bell Helicopter.
The loss of the GM plant’s 3,800 jobs would cost Texas another 7,900 related jobs, $179 million in income, $77 million in taxes and a net loss of $341 million to the state’s economy, the Commerce Department says.
The governor has already dispatched aides to Arlington to meet local officials and leaders from GM and the United Auto Workers union to discuss what to do. Richards plans to deliver the word personally to Stempel.
The factory that GM calls its Willow Run assembly plant lies in Ypsilanti Township, part of a community of 90,000 between Detroit and Ann Arbor. It is in the heart of an auto manufacturing network that crisscrosses southeastern Michigan with some 125 plants operated by the Big Three U.S. car makers and hundreds more by suppliers.
That in itself gives the Willow Run plant a big leg up, local leaders say confidently: GM has been closing its far-flung plants and consolidating within the Midwest. But then it was GM that went to Tennessee to build Saturns, and as many as eight of its Michigan factories are thought vulnerable in this latest round of shutdowns.
Already, the Ypsilanti area has suffered from cutbacks at its five area auto plants, such as GM’s big transmission factory. The auto jobs have dropped from about 24,000 a decade ago to maybe 12,000 today, Caprarese says.
“The loss of Willow Run would be a huge detriment to this area,” he says. “I hesitate to say devastating, because that sounds like a natural disaster. But it would be very detrimental.”
Just what the competing communities can do is not clear, however. Even if they were flush with tax dollars and able to offer sweeping tax breaks beyond what the plants have already been granted, experts say such savings would pale in importance compared to such issues as the efficiency of the plants themselves, track records on quality, and so forth.
“They’re not going to make a site that’s uncompetitive competitive,” says Donald R. Grimes of the University of Michigan’s Institute for Labor and Industrial Relations. “They’re already maxed out on tax abatements. I don’t know what more they can do.”
Both communities report they are working on the details. But for now, there is little more than brave talk about local “can-do” attitudes.
