Keys to the economy: Auto workers fear aftereffects from industry failure

SANDUSKY Darrell DeQuichi doesn't want a handout or bailout. The Ford Motor Co. robot operato
Annie Zelm
May 24, 2010

 

SANDUSKY

Darrell DeQuichi doesn't want a handout or bailout.

The Ford Motor Co. robot operator and part-time union representative said he just wants Congress to consider leveling the playing field for an industry many consider to be the backbone of the middle class.

DeQuichi, 50, has worked at the local Ford plant, now known as Automotive Components Holdings, for 15 years and credits the company's health insurance plan for keeping his family out of bankruptcy.

With three young sons at home and another elsewhere, he was hit hard with medical bills when his wife broke her leg and was unable to work.

As Congress continues talks of a possible $25 billion loan to rescue the automotive industry, the Sandusky couple is keeping their fingers crossed. The fate of thousands of others like DeQuichi hangs in the balance -- and concern spreads far beyond the automotive plants.

"The auto industry is what made the middle class," DeQuichi said. "When we go, it's a trickle-down effect ... it affects the community as a whole -- it goes to tax levies, eventually to fire, safety and the health department."

DeQuichi said he's tired of seeing Congress shell out billions to save banks with few explanations or conditions, while holding off on extending a lifeline to the auto industry.

"If you're giving out money, you gotta make it fair for everyone," he said. "Ford Motor Co. been making concessions since 2000. Employees haven't had a raise in seven years and (Ford) cut 35,000 jobs since 2002. We've been giving back all along to make our company stronger ... but as I've seen historically, you can only give so many concessions before you hit the bottom."

An uncertain future

DeQuichi is just one of the 666 hourly and 135 salaried ACH employees on the company's payroll. The future of the employees, each with a face and a family, are what keeps UAW Local 1216 President Kevin Furr up at night.

The hourly staff, consisting of about 1,100 people several years ago, has nearly been cut in half. About 160 of those now on the payroll were hired as temporary employees when ACH intended to sell or close the plant quickly. Almost two years later, they are still working at about half the wage of Ford employees with few benefits, Furr said.

Furr has a list of 1,400 living retirees -- people who fought to earn the benefits he and other union members now enjoy. But their pension is only as secure as the auto industry itself.

If Ford failed or went bankrupt, Furr said those pensions could go into a government-funded pension holdings fund that pays only cents on the dollar.

Sandusky resident James Taylor, who retired in 1991 after 35 years of working at the local Ford plant, said he constantly worries about his own future and that of the UAW Retirees. He is the treasurer of the group.

"When I was hired in, I was making $1.75 an hour and retired making $15 an hour," he said. "That was because of the cost of living averages (COLA). If you take the COLA away from (workers today), they'll be making less than half of what they're making now. We worked hard for what we have, and to have them take it away overnight..."

Taylor paused. He said the thought of losing it all makes him sick to his stomach.

The UAW Local 913 represents about 750 hourly employees at Kyklos Bearing International (formerly Delphi), about 600 at the Lear Corp. in Huron and about 250 at Tower Automotive in Bellevue. The group has similar concerns held by Taylor and has continued scaling back.

"Our production workers have taken a 46 percent cut in pay," UAW Local 913 president Doug Preston said. "(Their pay) is not based on cost-of-living averages anymore. I think the public thinks we're a bunch of fat cats with our salaries ... but we have highly technical jobs."

Preston said many production positions require crafting tiny parts -- thinner than a human hair -- to precise measurements that ensure safety and quality.

If the job is not done properly, a vehicle could lose its tire -- or worse.

Workers must also endure long hours of standing in one place performing repetitive motions in loud and often dangerous conditions.

And though many have criticized automotive workers for their "high" wages, they fail to distinguish the straight wages from pensions and health insurance benefits -- which have been whittled down over the years.

Straight wage averages for workers at the Big Three were about $28 an hour in 2007 -- a little less than $60,000 per year, according to the Center for Automotive Research.

Temporary employees and more recent hires are making about $10 less, with few or no benefits. But, as the "no foreign cars welcome" sign in the Local 1216 parking lot reminds the public, the significance of the auto industry goes far beyond its own employees.

A ripple effect

One out of every 10 American jobs depends on the auto industry, according to a study by the CAR.

Some state development experts say that number is inflated, but they seem to agree that the industry is the motor that keeps Ohio's economy running.

The number of Ohio's auto industry workers -- including auto plants, suppliers and dealerships -- exceeds 250,000, according to the Greater Cleveland Auto Dealers Association. Auto sales account for about 20 percent of the retail activity in the United States.

A new study by CAR concluded that if all three U.S. automakers were to cease operations, the U.S. economy would lose 2.95 million direct and indirect jobs in the first year. It would also result in a loss of at least $156.4 billion in taxes within the first three years.

"When you look at the cascading impact of one of the Big Three, you take out the suppliers, (and) then 20-30 percent of their business is gone," said Dave Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. "Over a period of time, you could take the entire industry down. And if you have 2.5 to 3 million people not working -- collecting unemployment, not paying taxes -- it's just substantially (costlier) than providing (the industry) with a bridge loan."

Annie Hetman, spokeswoman for the GCADA, said that aside from direct automaking operations, as many as 25,000 people work at dealerships in the 21-county region of the GCADA alone, which includes Erie County. And were Ford, General Motors and Chrysler to fail, it would lead to problems among foreign-vehicle producers too.

"This loan package isn't just going to affect the Big Three -- the foreign guys will be affected just as much because they all pull from the same suppliers," she said. "Our biggest concern is there's such a stigma with a bankrupt company -- it just really depletes consumer confidence in that brand."

The GCADA supports laws that would prop up sales including a deduction of vehicle sales tax paid on new car purchases through December 2009, funding for state "cash for clunkers" programs, and refundable consumer tax credits for car and truck buyers. The association is also encouraging its dealers to write to Congress.

Gov. Ted Strickland joins the governors of five other states in encouraging federal officials to use some of the $700 billion federal banking bailout package to help the auto industry.

Hitting close to home

Locally, the failure of any or all of the Big Three could be particularly devastating to Erie County, where automotive suppliers make up the bulk of the manufacturing economy.

Erie County Economic Development Corporation executive director Mark Litten said it's a scenario he'd rather not consider.

"I don't want to think about it, because it would cripple our manufacturing," he said. "It's obvious people go where there's work, and if that happens, we probably would see a loss of population."

Litten said he is hopeful Congress will give automakers access to credit -- a lack of which he believes led to their downfall amid slumping sales.

Auditor Tom Paul said neither ACH nor General Motors supplier Kyklos Bearings International (KBI) directly contributes city income tax because both are located in surrounding townships. Because income taxes are protected by confidentiality laws, it's difficult to determine how many workers at those plants pay income taxes and to which communities. The plants do, however, pay a significant amount in real estate taxes to the county.

Based on 2007 property values, ACH pays $196,576 per year to Margaretta Township while KBI pays $205,791 in property taxes annually to Perkins Township, Paul said.

Bruce Molnar is the owner of Dorr Automotive in Milan. The business closed its Chevrolet division in September but retained its Hyundai line and continues to service a variety of vehicles.

Molnar said automotive dealers have always been anchors in their community in terms of charity and philanthropy.

Problems in the industry and credit markets have spilled over into the sales divisions, he said. But a federal loan could help domestic automakers progress, he added.

"These companies will have to make changes, but that's what (the industry) needed," he said. "I think they've tightened finances and are cutting what they should."

What's next?

Steve Schoeny, director of strategic business investments for the Ohio Department of Development, said although the state cannot provide the auto industry with the $25 billion it says is necessary to survive, the department is trying to determine whether it can help in other ways. He said he believes the domestic auto industry has long-term viability but still needs to make some serious changes.

"In Ohio, the largest auto employer is not domestic -- it's Honda," he said. "People will continue to buy cars -- they will buy cars from companies that make cars they want to buy. And those companies that do that at a competitive price will be the companies that succeed. We believe domestic automakers are capable of getting there, but where they stand now, there are clearly some short-term viability questions.

Attached to any federal loan should be a plan for viability, Schoeny said. Assurance needs made that "this isn't just money for shedding jobs and making good on past debts, but money for moving forward," he said.

Democrats and Republicans are split on the issue of a possible federal loan and how it should be structured.

Democrats seem to favor using some of the $700 billion Wall Street rescue package to boost the industry, while some Republican leaders have warned against using taxpayer money and advocate allowing the Big 3 to restructure through bankruptcy.

The White House and Republican representatives' most recent proposal allows Congress to loosen the rules on a $25 billion loan authorized last year to help automakers produce more fuel-efficient vehicles.

But with a concrete plan on hold and automakers like General Motors burning through about $5 billion a month -- according to the Associated Press -- the industry appears to be running out of time. The new administration doesn't take the reins until January.

State Sen. Mark Wagoner, R-Toledo, said although he considers himself a fiscal conservative, he recognizes the importance of jump-starting the industry as soon as possible.

"I'm not a big fan of the bailout done for Wall Street, but I think we need to take a hard look at the auto industry and helping them out," he said. "This is a lifeline -- we need to make sure accountability is in place and that these dollars are needed, which I think they are, and that these will be viable companies.

"I do think Congress needs to help if they can ... (but) before (automakers) come to Congress, they would need to exhaust every other avenue they have."

Making changes

The UAW Local 1216 president says Ford Motor Co. has already made significant strides in quality and fuel efficiency even as fuel and steel costs have doubled.

By 2010, the company plans to release a twin-turbo EcoBoost engine that provides as much as a 21 percent reduction in fuel costs, Furr said.

At the same time, employees have already given up a portion of their pay to fund retiree benefits while taking some financial burden away from Ford. Those changes, combined with other technology already in the works, are expected to be key to the company's recovery.

But the uncertainty hasn't stopped about 85 percent of local ACH employees from contributing to charities like Toys for Tots through a community action program, said UAW Local 1216 job security representative Jeff Griffin.

"We don't know if we'll have a job in six months," Furr said. "But even if we hurt, we give."

In the meantime, workers like DeQuichi say they're "just trying to make an honest living" while staying positive.

"We have a lot less weight than we had even five years ago -- we've combined a lot of job classifications, and less people are doing more," he said. "I actually see growth in the future. I see our community growing stronger.

"I just hope people realize that the auto worker is an asset to the community and not a detriment."