Failure of GM’s reorganization plan would be disastrous for the valley, observers say.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
Bert Cene hopes the safety net under General Motors holds — for the sake of the Mahoning Valley.
The former steelworker lived through the demise of the local steel industry 30 years ago, and now as a director of job training programs, he knows the area can’t afford another major industry to go under.
“It’s hard to say what the devastation would be, but it would be bad,” said Cene, executive director of the Mahoning Columbiana Training Association.
Valley leaders are on edge today because GM is expected to file for bankruptcy protection after months of trying to restructure on its own. Fritz Henderson, GM’s chief executive, is planning to meet with reporters at mid-day.
Unlike 30 years ago when area steel companies collapsed, the bankruptcy is not expected to be the end of GM because the federal government has been working to protect the automaker.
“We have to hope for the safety net,” Cene said.
The government has loaned GM $19.4 billion and plans to provide more financing if there is a bankruptcy. It also is offering money to the automaker’s suppliers and leaned on bondholders and unions to take concessions.
The automaker hopes bankruptcy will give it time to spin off its Chevrolet, Cadillac, Buick and GMC brands into a separate company with less debt and lower costs. That company could be on its feet in two or three months.
GM’s plan positions the company for success, but only if several conditions fall into place, said Don Constantini, chief executive of Falcon Transport and Comprehensive Logistics, two local GM suppliers.
Besides favorable rulings from the bankruptcy judge, GM also needs increased car sales in order to cover its costs, Constantini said.
Failure of GM’s plan would be disastrous for the valley, Cene said.
GM’s assembly and fabricating plants in Lordstown have 4,500 hourly workers, although both plants are starting a six-week shutdown today to reduce inventory. Throughout this spring, the complex was operating with just one shift and about 1,800 workers. The rest are hoping to be called back when the car market picks up.
The Youngstown/Warren Regional Chamber said last December that the Lordstown complex had a payroll of $479 million when it was operating at three shifts and that much of that money is spent at local stores and health-care facilities.
In addition, the chamber estimates that the GM complex creates 1.5 additional jobs for each worker.
Several hundred of those jobs are tied directly to the complex because suppliers have set up nearby plants to provide seats and other parts for the car.
Cene said the impact goes well beyond those plants because workers at GM and its suppliers spend their money at local stores and restaurants. If the GM payroll were to disappear, the impact on those businesses would be drastic, he said.
Constantini said he doesn’t know how his companies will be impacted by the bankruptcy because it isn’t clear if they will recover money that is owed by GM. A judge would decide whether GM has to pay debts that exist at the time of a bankruptcy filing.
Constantini added, however, that he is working on qualifying his companies for assistance from $4 billion that the federal government has set aside for suppliers. That money is designed to cover bills that automakers owe suppliers, he said.
Comprehensive Logistics has about 150 employees at its Austintown plant. It arranges parts from other suppliers so they can be sent to Lordstown in the order they are needed. Falcon has 1,100 drivers nationwide, including nearly 200 locally, who deliver parts to automakers and haul material for other customers.
The impact of a bankruptcy on retirees is crucial as well.
Cene said GM retirees make up a big part of the local economy because of their pensions and health care benefits.
While such benefits often are reduced in bankruptcy, GM just reached a contract with the United Auto Workers that eliminates dental and vision coverage for retirees but leaves pensions untouched.
The Lordstown complex has about 8,000 retirees.
In an attempt to cut more costs, GM is announcing more plant closings today, but industry analysts expect Lordstown to survive because of the scheduled Cruze launch.
Cene said he hopes the new car will help the valley avoid a repeat of the steel mill closings.
“It looks like they are going ahead with the Cruze and that’s definitely good for Lordstown,” Cene said.
SEE ALSO: Majority of bondholders support reorganization and White House: GM to file today for bankruptcy.