When the American dream breaks down

Sat, Dec 13, 2008, 00:00

Detroit is a city on its knees. Its auto industry, the heart of a business that employs one in 10 Americans, is on the brink after the Senate this week turned down a $14 billion rescue deal

THE SOULFUL BEATS of Motown Records echoed the tireless rhythm of the production lines at Ford, General Motors (GM) and Chrysler - Detroit's Big Three car manufacturing plants. But that was back in the 1960s and 1970s when hundreds of thousands of men and women worked three shifts a day to churn out muscle cars and gas guzzlers with evocative marques like Thunderbird, Mustang, Chevy and Dodge.

Today one hears little music in Detroit. The factories are virtually silent while the streets of this once bustling hub of American industrialisation are desolate and in ruin. The fortunes of this once great city have sunk to lower and more onerous depths with every passing year.

Unemployment in Wayne County, Michigan, where Detroit is found, is among the highest in America as the car makers have shed tens off thousands of jobs. But it is not just the car makers and their employees who have suffered. Businesses, from the smallest diner to real estate brokers, builders and shop keepers have been crippled by the seemingly endless decline of Detroit's economy.

The massive burden of paying workers' healthcare costs and pensions, plus lots of other union perks agreed when times were good, has long been a millstone around the necks of the Big Three. These costs mean they cannot compete with the likes of Toyota, Honda and Nissan.

GM recently renegotiated healthcare and pensions with the United Autoworkers Union (UAW). But even if the car-makers can turn themselves around, there are few people in America willing to splash out on a new car in the middle of a recession. With the credit markets locked up it is hard enough to get a lease for a vehicle, never mind a loan to buy one. GM has barely enough cash to last through next month while Chrysler is in such dire straits that it has already hired lawyers that specialise in bankruptcy protection. Ford is in slightly better shape but it still wants access to $9 billion of government loans - just in case.

The humiliation of this slump has heightened in the past month with the chief executives of GM, Chrysler and Ford going to Washington to beg for billions of dollars of government aid just to stay afloat. Their first visit, in November, proved fruitless. All three chief executives were castigated for flying to the Capitol in separate private jets and reprimanded for squandering the fortunes of a once world-leading industry.

They returned a couple of weeks later - this time by car - to show how the federal money would be used to restore jobs and productivity to Detroit. They were looking for a $34 billion rescue fund and Congress was not willing to hand it over without a fight. After another week of deliberation the House of Representatives agreed a stop gap loan of $14 billion to keep the car-makers afloat until the Obama administration starts next month. However, the bail-out deal failed to get Senate support on Thursday, raising fears of job cuts and a possible industry collapse. The rescue plan fell over Republican demands that the United Auto Workers union agrees to swift wage cuts. The White House said the plan was American car-makers' "best chance to avoid a disorderly bankruptcy".

IF YOU TAKE a drive around downtown Detroit, it is obvious that $34 billion would be a drop in the ocean of despair that has engulfed this city. Driving past the glittering glass and steel headquarters of General Motors and the newly built Motor City Hotel and Casino - a pair of out of place white elephants - the infrastructure of Detroit disintegrates before one's eyes.

Empty, burned-out factories line routes 75 and 94 on the way out of town, all of them former players in the dying American auto industry. The scene of desolation is profound. How could so many factories and warehouses lie empty and vandalised in one city? And where are all the people?

From the interstate, in the distance, I spotted a man sitting alone on a dining chair in the giant parking lot of an abandoned factory. His name is Anthony Boyce, a 55-year-old who earns a living guarding the empty factory in which his friends used to work.

"Ten years ago this place was booming," he says. "It's hard to believe isn't it? Back in 1985 I used to work for General Motors fitting radios and the cruise control switches to the dashboards of cars. But they moved the factory somewhere else and that was that. Now I do security. What they are guarding this for I do not know. There is nothing here."

Surveying the post-apocalyptic vista before him, Boyce says he once thought he was living the American Dream. "I thought it was the auto industry, you know, with jobs and pensions and health insurance and what not, but that went pop. Now they say they are building condos everywhere down here but I don't know who they think is going to buy them. I guess that's another type of dream."

A FEW MILES down the road the crowds are gathering for a Michigan Wolverines college football game. They are playing the Toledo Rockets in a local derby. Men, women and children in their thousands, clad in bright yellow colours, rush through huddled groups of "tailgaters" - football fans who prefer to sit outside the ground on lawn chairs drinking beer and grilling burgers in the parking lot.

Dirk Kaymike (27) is one such tailgater who believes the failure of the American auto industry has been the most damaging aspect of the country's economic decline. "I do not think there is a single person in the Detroit area that doesn't at least have a connection to somebody that is affected by it."

Dealing with the slow decline of the economy and the gradual draining of the city's lifeblood has taken a huge psychological toll on the people of Detroit. Louise Schefler (60) works for Ingersoll Rand making heavy engineering equipment. "I have been in this job and a United Auto Workers Union member for 20 years but I think I will be losing my job pretty soon. I think I will be among the next to go," she says.

Inside the stadium, more than 100,000 diehard fans cheer on the Wolverines, assisted by a huge brass band and legions of cheerleaders. Many of the supporters are students fearful of what the future may hold.

Sharthe Vanayagam (19) is worried about the economy: "Things are in a real mess. I am hoping there are jobs when we get out of school." His friends Eddie Zinger (19) and Christian Henes (18) agree. "A lot of people here study engineering," Henes says, "They are worried because they don't know if there will be any engineering jobs in America when they graduate."

Even the seemingly prosperous suburbs are suffering. Bill and Pam Conn run Mule Skinners boot store in the village of Chelsea, a picturesque hamlet about half an hour outside Detroit. The shop is an Aladdin's cave of Western wear and, as Bill proudly states, "historically correct cowboy holsters and quality concealment garments" for concealing your gun.

"We used to sell a lot of work boots to the men around here," says Pam. "But not any more. We were very lucky though - they all came here and bought their last pair of boots before they all left town to go work somewhere else." Bill, who makes many of the intricately tooled leather goods on offer, is passionate about his business but realistic about the prospects for the Detroit area. "I would move away from here if I could sell the house," he says.

Bill is scared to go to Detroit on his own and without "protection", as the prolonged economic decline has sent crime rates through the roof. "Detroit is no place to go visit. It's not safe these days." He shows me a large, black flick knife. "Don't get out of your car in Detroit without this," he says.

As American politicians continue to deliberate the size and scope of the aid package for Detroit they should perhaps come and see the place for themselves. Perhaps they will also realise Detroit needs more than money, it needs an injection of hope and inspiration to restore the city to its former glory.

Vital Statistics: US Motor Industry

• There are 355,000 Americans directly employedby the "Big Three" of General Motors (GM), Ford and Chrysler. One out of every 10 people in the US is employed in a service that is related to the auto industry, says GM.

• Chrysler claims the direct economic impact of it US operations exceeds $29 billionannually. GM has 6,500 US dealers, employing 340,000 staff. Chrysler has 3,300 dealers, employing 144,000 staff. Ford has 3,790 dealers.

• The US car industry spends $12 billion a year on R&D, according to Ford's submission to congress. This compares with €20 billion a year spent by car firms in Europe, according to the European Automobile Manufacturers Assocation (ACEA).

• The share price of GM in October 2007 was $43 compared with $4.30on December 11th. GM's hourly labour cost (including healthcare) is $70.This figures is $40 at foreign-owned plants in the US. GM reported losses of $2.8 billionbetween July and September this year and burned through $6.9 billion in cash over the same three-month period.

• GM operates 13 brands: Buick, Cadillac, Chevrolet, Corvette, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn and Vauxhall. Chrysler owns the Jeep and Dodge brands while Ford owns the Lincoln, Mercury and Volvo brands.

US new car salesbetween January and November were 12,347,893 in 2008 and 14,759,864 in 2007.

Michael McAleer