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GM troubles produce worry in Valley

Published: Thu, November 13, 2008 @ 12:10 a.m.

By Don Shilling

A shutdown of Lordstown would compare to the steel mill closings, a professor says.

General Motors is running low on cash, and that has local business leaders worried.

“We’re concerned about it,” said Doug McKay, chief executive and chairman of Home Savings and Loan Co. “Many of our customers are dependent on GM, either directly or indirectly.”

The auto industry has been debating the possibility of a GM bankruptcy since the automaker announced Friday that it would be low on cash in early 2009, if not late this year. GM has said it needs between $11 billion and $14 billion to run its daily operations, but its cash reserves declined by $6.9 billion in third quarter to $16.2 billion.

Should economic conditions lead to a bankruptcy or a shutdown that impacts GM’s Lordstown complex, the effects would be felt throughout the Mahoning Valley, said Tom Humphries, president of the Regional Chamber.

“I’m very concerned for the Valley,” he said.

John Russo, coordinator of the labor studies program at Youngstown State University, said the economic impact of the Lordstown assembly and fabricating plants extends far beyond the nearly 5,000 workers there. The complex has hundreds of suppliers, many of which are located nearby.

The chamber estimates that GM plant creates 1.5 additional jobs for each plant worker, which makes more than 12,500 jobs. The payroll for all of the jobs is estimated at $474 million.

Also, many of the area’s retailers and service businesses are supported by spending from these workers, Russo said.

“A shutdown of Lordstown would be another major blow to our regional economy, not unlike the shutdown of Youngstown Sheet & Tube and U.S. Steel in the late 1970s,” Russo said.

The Center for Automotive Research in Ann Arbor, Mich., issued a study last week that said a failure by a major U.S. automaker in 2009 would eliminate 2.5 million jobs nationwide, including 1.4 million people in industries not directly tied to manufacturing.

Those disruptions would cost $125.1 billion in lost personal income in the first year, and $275.7 billion over three years, the study concluded.

GM, however, is dismissing bankruptcy talk. Rick Wagoner, GM chairman and chief executive, said Friday that it wasn’t being considered because executives think “the consequences of bankruptcy would be dire.”

Even so, GM and other automakers are insisting that they need immediate help from Congress. The automakers are seeking $25 billion in loans to keep the companies operating and a separate $25 billion to help cover future health care obligations for retirees and their dependents.

No one is sure what would happen if GM did resort to bankruptcy, which can allow companies to restructure by voiding union and supplier contracts.

Russo said he would be concerned that GM would follow the example of Delphi Corp., the auto parts supplier that filed for bankruptcy in 2005. It shut down most of its North American operations to focus on its profitable overseas divisions.

Delphi’s hourly employment in the Mahoning Valley has fallen from 3,800 to 750.

John Wolkonowicz, an analyst with Global Insight Inc. in Lexington, Mass, said a GM bankruptcy would disrupt the economy but could benefit the company in the long run. GM could pare down models, brands and dealers, then move remaining production to non-union plants in Mexico, he said.

Humphries said, however, that doesn’t think GM would automatically walk away from Lordstown in a bankruptcy. The company was confident enough in Lordstown that it recently announced it as the production site for the Chevrolet Cruze, and local union leaders and management have worked hard to make the complex competitive, he said.

Humphries said he isn’t sure how Congress should respond to the automakers. Federal investments were approved for Wall Street investment banks and then other banks, and now the automakers want federal assistance.

“Where does it stop?” Humphries asked.

He noted that congressional representatives from non-automotive states are questioning why workers in their states are financing a bailout of automakers.

Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Mich., said much of the nation is against helping the automakers because their wages are higher than the average manufacturing wage.

He said he thinks both the United Auto Workers and management will have to agree to wage and benefit concessions to get the deal through Congress. Longtime UAW workers are paid $29 an hour, while new workers in non-assembly line jobs are making half of that under a labor contract approved last year.

McKay from Home Savings said he generally supports free-market principles but added that he could not support the federal investment in banks without supporting the loans to GM. He said the loans can benefit the government if they are structured to be temporary and allow the government to make money when the loans are repaid.



1apollo(1227 comments)posted 7 years, 8 months ago

Exactly right Grump. A bailout is simply delaying the inevitable. Companies within an industry whose cost are much higher than the norm are companies that are doomed to fail unless they address those costs.

GM, Ford, and Chrysler MUST cut their labor costs or face bankruptcy or death.

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2dmets(575 comments)posted 7 years, 8 months ago

I think GM should have thought before building a 300 million dollar plant in Russia. What was wrong with building the cars here and shipping them there? I think these companies need to put the US people first. They have screwed themselves. I find that this a huge mismanagement of money from big executives! They need to cut their pay and bonuses and put it into the actual business.

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3msweetwood(179 comments)posted 7 years, 8 months ago

Rick: Don is merely reporting the views of analysts looking at the situation; he was not advocating a position. One simply needs to look at how the entire planet is debating a GM bailout vs. bankruptcy today from Forbes to the New York Times to get a sense of both how dire the situation is and how many different scenarios and ramifications there are to ponder. Consider all viewpoints as food for thought.

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4tdhjones(7 comments)posted 7 years, 8 months ago

When things get tough (which they are) it is easy to blame the UAW, but how about all the pork at the top of the ladder? It is not the bottom of the ladder that is the problem. Everyone deserves to have health care, a decent wage and a vacation. America is on the verge of becoming a third world country where there are only two classes, the very rich or the very poor.

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5Ruskiryan(7 comments)posted 7 years, 8 months ago

The Russian plant will be manufacturing parts for export to the US and then assembled here

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6Ruskiryan(7 comments)posted 7 years, 8 months ago

I am from Europe, since coming to the USA all I see is a nation of over spending people who want the high wage packet but do not want to do the hours for it. I see people who have bought homes that they can neither afford or too big for their needs.
And the use of credit cards is ridiculous.

The Government should not bail out the companies, they are private Business and should rise or fall on their own. the Billions in so called hand outs should be spent on creating a national health service for the American People, and creating financial education for the the next generation.

Gm should sell off some of the plants to BMW or Toyota. They are successful at what they do, and they build a better product.

It has nothing to do with Buy American! because lets face it nearly all products in the shops here are made either in China, Mexico or Pakistan.

As a nation the American people need to think globally, then they will start to do better.

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7Ruskiryan(7 comments)posted 7 years, 8 months ago

PS, I live here in the US and I love the country, I love the people and I love my freedom too. I am proud to wave the American flag but I am prepared to open my eyes to the rest of the world and see that a car is just a car and a piece of metal is just a piece of metal, I am happy that people in other parts of the worl now have the opportunity to earn money to support their families and to progress, I am not jealous or angry because I see us as one people on one planet.
I earn $7.25 per hour as a night cleaner, I own my house outright because I paid cash for it and renovated it myself, I own my car outright because I bought one that I could afford to pay cash for. My son has a computer and new clothes and we go out to McDonalds sometimes too. but I am not in Debt and I have no credit card bills.
I am not saying that I wouldn't mind a new Caddy or a nice big house that costs too much to heat, But I can sleep at night and I can afford to work for $7.25 per hour. I have no rent or mortgage to pay!.

As Adults we need to stand back and asses our financial situations and be honest with ourselves.

The Government need to do the same, as do the Car companies.

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8dmets(575 comments)posted 7 years, 8 months ago

So why did they not build the plant here, instead of Russia. American made cars should have there parts made here in America. No, we have labor laws and wages here. So American companies go to other countries and skate around the laws. Maybe these companies need to have to pay the same everything to these people over seas. Then maybe the jobs will stay here in the states!

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9clayor(281 comments)posted 7 years, 8 months ago

I don't think the bailout will happen for the car makers.....supposedly the votes "are just not there", to make it happen, according to tv reports. Maybe bankruptcy would be better, at least nobody would lose their jobs. This is merely a restructuring.Although I doubt the union would be interested.

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10Jane(8 comments)posted 7 years, 8 months ago

Grump, I agree. Management and those ridiculous collective bargaining agreements must go. What poorly managed almost bankrupt industry will we bail out next? How about retail? How about construction or mining or transportation??? Where does it end? Sorry, sounds like a bad investment for my tax dollars.

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11dmets(575 comments)posted 7 years, 8 months ago

You ask who will be bailout next? Why not the American people. Why not give us the money to pay off your houses, cars, student loans, credit cards, and anything else. I mean technically it is our money. So why not give it back to us!?!? They people are the ones who are truly suffering!

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12clayor(281 comments)posted 7 years, 8 months ago

For once, I agree with you dmets! That would be a good thing!

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13wolfrun1(100 comments)posted 7 years, 8 months ago

The Titanic ... has already sunk ... along with G.M. ! they have sent 600 million to Russia to build the cruze ...along with the cruze being built now at Dawoo in Korea ... and other factories around the globe ....along with the delay at weather if it will start to be built at lordstown .... now they want the Taxpayers to bail them out with no restrictions ....I THINK NOT !!!!! let them try to stay afloat the same way as the rest of us are supposed to !!!!

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14lebronjeremy(16 comments)posted 7 years, 8 months ago

YSUgrad, just because you toured the plant once doesn't mean you know everything about it. There are a lot of workers making $29/hour. But there are even more making $17/hour. Let me ask you something? Would you work in a place where in 50 years, you won't be able to walk because of back pain, or bend your knees because of arthritis? What about the high risk of emphysema from inhaling large quantities of dust, smoke, metal flakes, and chemicals? Oh and you have to work that job at a wage that is deemed worthy by someone who has never worked the job, or clearly any production line in his life.

GM signed the contract with the union that guarentees the "high" wages and the health benefits. Why shoulnd't they have to abide by the contract? I'm sure you have a job. Did you sign a contract with your employer? Would you be angry if tomorrow they said, "We're going to cut your wage in half because some guy who graduated from Youngstown State in 1999 thinks you make too much...oh, by the way, I'm giving myself a $450,000 bonus?"

Who do you think should make the concession in that case?

Your a smart guy but you don't know what your talking about here.

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15lebronjeremy(16 comments)posted 7 years, 8 months ago

That probably wan't the best time for me to misuse "your" for "you're."

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16clayor(281 comments)posted 7 years, 8 months ago

Well it looks like the bailout pkg. for GM will not be considered until the new Congress is in place. I thought GM said they barely had money for 2 weeks....but, on the other hand, the "new" Congress will see to it that GM is bailed out, Obama owes them......the hell with the rest of us.

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17dmets(575 comments)posted 7 years, 8 months ago

I still think the taxpayers' money should have been put in the hands of the taxpayers. I'm not going to argue over GM. We all know that top management take huge bonuses. I find the mismanagement of the way they spend the money to be a joke. We, the people, are who ALWAYS get screwed!

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18lebronjeremy(16 comments)posted 7 years, 8 months ago

dmets I agree. But we both know there is no way they would do that.

clayor, he doesn't owe them anything. GM lobbyists didn't give him any money. And that money would come out of the $700 billion that congress already approved, so we wouldn't have to see anymore money come out of our pockets. Plus, it's a loan; GM will have to pay it back.

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19Tugboat(759 comments)posted 7 years, 8 months ago

House Speaker Nancy Pelosi said the House would provide aid to the ailing U.S. auto industry, requiring that the industry meet new fuel-efficiency standards, produce advanced vehicles and restructure "to ensure their long-term economic viability."

Gee. It takes a politician to point out the obvious? If the auto industry CEOs don't already know this, then it doesn't deserve the money.

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20andersonathan(687 comments)posted 7 years, 8 months ago

Try the old fashioned boycott of the big three. And look at KIA, Toyota, Nissan, VW, Honda and a few others Mazda, Mercedes. I am sure you will find something with a good price, good MPG and quality.

Let there overseas divisions "bail" them out, if they did that, then I say buy from them. Remember bankruptcy will not cover pensions being distributed already, those would be passed on to the tax payer for good. But at least the court could make all three abide buy rules and regulations and force UAW to negotiate on their terms.

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21lebronjeremy(16 comments)posted 7 years, 8 months ago

Andersonathan Why should the UAW be forced to renegotiate their terms? Don't you think the guys who got them into this mess i.e Rick Wagoner, should have to renegotiate his pay? Oh, and the UAW is taking money and investing and hoping for the best, because if GM files for bankruptcy people's pensions will run out in 2011. If the UAW's plan fails, a lot of people are going to be screwed.

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22andersonathan(687 comments)posted 7 years, 8 months ago

UAW is the problem. I will be glad to buy some locks and chains for the doors. I love my new Toyota. But don't worry Obama will bail them out 01.21.09

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23prodgodq(172 comments)posted 7 years, 8 months ago

Once again, the level of ignorant indifference to the difficulties of others on this comment board continues to amaze me.
The conservative estimate of the fallout from a GM bankruptcy is 1.5 million jobs. Most economic experts, including those who oppose a bailout put the figure closer to 2.5 million.
And yet I still observe the same ignorance as to the repercussions of losing an additional 2 million jobs on top of losses expected in the next two quarters.
Does anyone in the country honestly believe that losing so many jobs wouldn't affect every single other sector of the economy?
Judging by the mindless, self-centered posts that I'm seeing on this comment board, and the comment boards of other news sites, apparently so.
Apparently the thinking is: "I work in the ________ industry, so it won't affect me" - How stupid. Letting the Detroit automakers go bankrupt will affect every single economic sector of this country, and therefore everyone else in the country.
Whether we like it or not, we are all tied together as an economy and as a country.
Unfortunately, I think the population of this country is about to find that out in the absolute worst way possible.

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24andersonathan(687 comments)posted 7 years, 8 months ago

Maybe the big three can save some money on paint RED WHITE and BLUE colors only. Yellow cars called the Jihad are real cheap but you never know when there going to blow up.

Or maybe they can start selling some private jets to make payroll?

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25clayor(281 comments)posted 7 years, 8 months ago

They all flew into Washington in individual private jets....what's that tell you, they are looking out for their workers? If you work at GM ask for a private jet to take you to your vacation destination, see what happens.

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26Stan(9923 comments)posted 7 years, 8 months ago

GM may soon be history and we are well on the way to becoming a third world. Government energy policies caused hard times and now GM is to blame? Makes sense. The private jets used didn't cause the problem and confiscating them won't alleviate it.

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27XFilesX(77 comments)posted 7 years, 8 months ago

Today, I heard an interesting idea that I would like to share with everyone – a plan to finally solve all of the financial woes of the American people.

This is not some pie-in-the-sky pipe dream. It is within the ability of the U.S. government at this moment.

The idea is to take a part of the $1 trillion bailout and distribute it directly to the people. No, not some piddling $1,000 tax rebate. I mean a real bailout: $1 million to every man, woman and child in America. Think of it: America, the nation of millionaires.

After all, since the days of President Franklin D. Roosevelt, all we have heard from the Democrats is redistribution of wealth, fixing poverty and economic justice for all.

Now, they actually have a chance to do it. We need to demand that they actually perform this time.

No more nibbling around the edges with $1,000 tax refunds, $200 per month food stamp handouts, or $500 per year fuel assistance grants. No, it's time to talk about real money and a permanent solution to the problems of poverty and economic inequality.

Yes, much of it would go directly to the banks as people pay off their credit card bills and mortgages. So what! That's where it's bound right now. The big difference is that it won't require the Feds to hire thousands of bureaucratic hacks to administer the payments; the people will do it themselves.

Another benefit of this plan is that it would eliminate the need for almost every welfare program the Feds run. In a nation of millionaires, there would be no need for food stamps, Section 8 housing, Social Security or Veterans Administration disability benefits (I'll gladly give mine up).

Millions of government workers would no longer be needed. But don't worry about them. They're millionaires. They won't need those jobs.

We'd probably still need Medicare and VA medical benefits since health care can be so expensive, but we would not need nationalized health care: not in a nation of millionaires. And there are some technical issues to work out, but none serious enough to derail the plan.

So if you believe that the Democrats actually intend to permanently solve problems of economic inequality and poverty in America, write your U.S. representative today. Demand your $1 million share

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28XFilesX(77 comments)posted 7 years, 8 months ago

Received in the email box:

I’m against the $85,000,000,000.00 bailout of AIG.

Instead, I’m in favor of giving $85,000,000,000 to America in a “We Deserve It Dividend”.

To make the math simple, let’s assume there are 200,000,000 bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..

Divide 200 million adults 18+ into $85 billon: that equals $425,000.00.

My plan is to give $425,000 to every person 18+–as a “We Deserve It Dividend.”

Of course, it would NOT be tax free. So let’s assume a tax rate of 30%. Every individual 18+ has to pay $127,500.00 in taxes.

That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?

* Pay off your mortgage - housing crisis solved.
* Repay college loans - what a great boost to new grads
* Put away money for college - it’ll be there
* Save in a bank - create money to loan to entrepreneurs.
* Buy a new car - create jobs
* Invest in the market - capital drives growth
* Pay for your parent’s medical insurance - health care improves
* Enable Deadbeat Dads to come clean - or else

Remember this is for every adult U S Citizen 18+–including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.

If we’re going to re-distribute wealth let’s really do it…

If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!

As for AIG - liquidate it: sell off its parts.

Let American General go back to being American General. Sell off the real estate.
Let the private-sector bargain hunters cut it up and clean it up.

We deserve it and AIG doesn’t. Sure, it’s a crazy idea that can “never work.”

But can you imagine the Coast-To-Coast Block Party!

How do you spell “Economic Boom”?

I trust my fellow adult Americans to know how to use the $85 Billion “We Deserve It Dividend” more than I do the geniuses at AIG or in Washington DC.

And remember, this plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.

As long as we’re handing out money, why not hand out some to the people who paid it?

Multiply these numbers by 8.235 for the cost of the proposed $700 billion bailout now.

That’s $3,500,000 for each American adult before taxes: approximately $2 million after taxes.

America: the land of millionaires–and just not on Wall Street.

As J.G. Wentworth says, “It’s your money. Use it when you need it.”

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29clayor(281 comments)posted 7 years, 8 months ago

Sounds like a plan, X, but I only have one qualm, why give it to those who have never contributed a dime, I say distribute it to those people who have been paying taxes, maybe give an incentive to those who have no desire to work, legally, maybe they will wake up. But, you are absolutely right, people will buy cars, and pay cash, they will buy homes, pay off their mortgages, get their foreclosures back and want to buy newer homes, this economy would be bursting at the seams. It would be a win win situation for the people, maybe not so good for corporate CEO'S, but at this point who cares about them? They have been living large forever!

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30clayor(281 comments)posted 7 years, 8 months ago

This breakdown needs to be sent to the proper authorities, it is a sensible plan. Too bad they aren't sensible! Go for it, X, do it and see what happens!

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31XFilesX(77 comments)posted 7 years, 8 months ago

Good point clayor, but if we don't include the ones on welfare and such, they would continue to be a drain on society. This way they would be given a "clean slate" so to speak and that would be the end. It would be given with the stipulation that if you screw it up, you are done. No more help for you ever. Provide for those 900 children that you are popping out. Pay for their education. Help them yourselves. And no help for the kids. PERIOD. Just a thought...

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32bkdawg(5 comments)posted 7 years, 8 months ago

Note that most (if not all) of the $25 billion 'loan' to the Big 3 will go to the UAW! Not for day-to-day operations, but to the retirees of the UAW! Here's a link to the article:

I for one am sick and tired of people thinking that they should have pensions and fully-paid benefits for the rest of their lives. If you owned a business and I worked for you for 30 years - you paid me right?? Then why do you still have to pay me until I live to be 90?? In reality, you could collect more in retirement then when you worked!

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33clayor(281 comments)posted 7 years, 8 months ago

I see your point X and yes, I do agree with such a stipulation, you have good thoughts!! And BKDAWG...great link, very informative, thanks! Hope others read it.

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34Jane(8 comments)posted 7 years, 8 months ago

I have got to tell you that outside of Ohio and Michigan, the people of this country do not give a damn about GM, Ford, or Chrysler. After what was witnessed this past week in Washington I am not sure many in Ohio or Michigan care either. On the streets here I have heard nothing but disgust and disdain for the "Big Three", and it's a toss up as to whether the UAW or management has left the more bitter taste. As I write this thousands of people all over the country are writing (e-mailing) their congress person to tell them to just say NO to an auto bailout.
On another note, BKDAWG, I agree with you wholeheartedly. I have to work at least until I am 66 and probably longer if I intend to eat while retired. I should not have to pay 4000 dollars more for a Pontiac because I need to pay healthcare FOREVER so someone can retire at 48. Time to join the real world for the UAW and Management.

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35clayor(281 comments)posted 7 years, 8 months ago

Good news, the BIG 3 will be car-pooling to D.C. for the next begging session, like we missed it when they arrived in style...do they think we are all morons?

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