(USA) Michigan's 'one state recession'

"We currently have a design centre in Romania, in Eastern Europe. We were able tap into some of the local universities where they just have an untapped wealth of scientific and engineering labour."
-- Chris Mytnyk of Black River Plastics


(USA) Michigan's 'one state recession'

By Caroline Hepker
Business reporter, BBC News, St Clair County, Michigan
1 May 2008
Source

Just by the bridge that links Canada and America lies St Clair County, Michigan. The 170,000 people who live here have long depended on the American car industry, which is headquartered 80 miles away in Detroit.

But for the first time in 100 years, this county now has fewer than 10,000 manufacturing jobs. Unemployment is running at nearly 10%, double the national average. In the county's main town Port Huron the unemployment rate is even higher.

"About 8 years ago, we had 3-4% unemployment when things were good," says Vickie Ledsworth, president of the Chamber of Commerce in the Greater Port Huron Area.

"Now it's close to 15% locally. So we've really been hit hard.

"We have about a third to 40% of our population that commutes to work in other parts of the State."

Tough conditions

The car industry has been shrinking for years.

Whilst the rest of America was seeing booming home prices, record levels of employment and easy credit, General Motors, Ford and Chrysler were struggling to turn a profit.

Michigan was in what was dubbed a "one-state recession".

At the height of the US housing bubble, Collins and Aikman, one of the top 15 automotive parts suppliers in the country, filled for Chapter 11 bankruptcy protection.

Founded in 1891, the firm believed the car industry's woes would be short-lived. By 2007, it had sold off its assets and eventually closed down its factory in Port Huron.

Tricia Comtois was one of the 530 employees who lost their jobs. She worked at the factory for 13 years, earning $19 an hour as a quality control technician. Her husband also worked at the plant.

"You go from a two person income to collecting unemployment, which is less than half of what you usually make, so barely scrapping by, just making your bills and sometimes having to worry about what bill you're going to pay first," she says.

Going abroad

But there may be little respite for the families and businesses that survived the mauling of Motor City.

A wider down-turn beckons.

As Americans tighten their belts, car and truck sales have fallen for 6 months in a row. Vehicles sales are expected to reach about 15 million this year, down from 16.3 million in 2007.

Chris Mytnyk of Black River Plastics supplies General Motors. He has hung on to contracts by producing more intricate work, such as the dashboard of the Saturn Roadster; cup-holders, glove compartments and press-touch openers.

But he is letting go of staff.

"Over the past 10 weeks we've seen several rounds of lay-offs on a weekly basis," he says.

"Our numbers have gone from approximately 250 employees now to 190 employees, so a considerable chunk of our hourly and salaried personnel has been laid-off."

Outsourcing work and diversifying into other sectors are the only way to give his family business a future.

"We are trying to off-set the losses by moving off-shore," he explains.

"We currently have a design centre in Romania, in Eastern Europe. We were able tap into some of the local universities where they just have an untapped wealth of scientific and engineering labour."

Feels like a recession

But for those at home, it is a little harder, says Bill Kauffman, the director of the Metropolitan Planning Commission in St Clair County.

"Recession is a concern because people have limited prospects for additional employment," he observes.

"The employment that is available to them is generally lower paying because they lack the skill-set. All of a sudden, it creates a whirlwind of continued downturn throughout the local and regional economy and throughout the mid-west."

There is still debate about whether America is in a recession. The latest figures were slightly better than expected – with annual growth of 0.6% for the first quarter.

But Corina Eckl of the National Conference of State Legislators, who advises law-makers on economic issues for Nevada, Arizona, Florida, Maine and New Hampshire believes whether it is technically a recession or not is less important.

"It feels like they're in a recession and that's what really matters," she says.

"What this really means is; very serious decisions have to be made about state spending and state revenues."

New business

But it may not all be bad news for Michigan or the United States.

The American central bank has continued to cut interest rates to boost the economy and more than 130 million households have started to receive extra cash from the tax-man thanks to President Bush's stimulus package - actions that may help revive the economy come autumn.

In the meantime, Ms Comtois has started a small business selling hand-made baby-clothes in Port Huron.

"Sewing is something that we really enjoy and wanted to do for a long time," she says.

"It was now or never."