THE DOWNWARD SPIRAL
The collapse of the industry in 2008 that nearly put GM and Chrysler out of business and cost Ford billions of dollars came from a perfect storm that included the Great Recession, expensive gasoline and the financial meltdown that dried up funding for car loans. But the automakers' problems were years in the making.
They had business models that couldn't generate enough cash to cover expenses. They had too many factories making too many cars and trucks. They sold too many vehicles at discounts or even steep losses just to move them out of showrooms to make room for more. And their workers earned more in wages and benefits than Japanese competitors.
Even when autoworkers were laid off, companies couldn't get them off their books. Union-mandated "jobs banks" forced automakers to keep paying workers whose plants had been shut down. They got paid to sit in rooms and do crossword puzzles.
Years of losses caused the three U.S. automakers to rack up $200 billion in debt, about half the liabilities that are now strangling Greece. GM alone lost $82 billion in the four years before bankruptcy. All three companies had to pay escalating health care costs for workers and a staggering half-million retirees — a number about equal to the population of Portland, Ore. At GM, medical costs for workers and retirees added $1,500 to the price of a car.
An increasingly bad situation turned worse during the 2001 recession, which was followed by rising gas prices that lasted for most of the decade. Then came the 2008 financial meltdown. As GM and Chrysler careened toward bankruptcy, President Bush stepped in, loaning $17.4 billion to GM and Chrysler just before he left office. But auto sales remained in a free fall, plummeting to a 30-year low of 10.4 million by the end of 2009.
At the Orion (pronounced OHR'-ee-uhn) plant, the recession had slowed sales of the midsized Pontiac G6 and Chevrolet Malibu cars that were made there. In February 2009 the company eliminated a shift and laid off 400 workers. The outlook darkened even more when GM announced it would dump the Pontiac brand. Since the G6 made up half of Orion's production, workers feared the plant was doomed.
It didn't take long for issues inside the plant to ripple outside to the surrounding concrete industrial parks. Dozens of auto-parts companies laid off workers. At Casey's Chicken, a barbecue joint in a nearby strip mall, a healthy side business catering GM birthday and retirement parties dried up.
About that time, Orion Township's chief executive, Matt Gibb, got a call from Ed Montgomery, President Obama's auto-recovery czar, telling him the plant was on a secret list of GM factories to be closed. The factory was the township's largest employer and taxpayer. About a third of its 35,000 residents work for GM, Chrysler or parts suppliers.
As Gibb watched the local economy unravel, he was haunted by a documentary he had seen about Janesville, Wis., where another GM plant had closed, leaving behind empty industrial parks and ball fields overgrown with weeds.