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Fractured Economy in Northeast Indiana on the Mend

October 13, 2009 by · Leave a Comment 

The health of the northeast Indiana job market is on the mend after months of suffering more acutely than the rest of the country.

In the three months ended Sept. 30, employers in northeast Indiana and northwest Ohio announced plans to add 1,080 more workers than they planned to cut, according to a quarterly analysis by the Journal Gazette, Fort Wayne, Ind.

It’s the third such analysis this year and the first to suggest a net gain of jobs in the 15-county region.

As in the previous two quarters, manufacturing was the dominant sector in the most recent economic scorecard. Big announcements at two of the region’s manufacturing powerhouses accounted for 1,000 of the 1,670 jobs that employers promised to create.

General Motors Co. announced last month that with the closure of a truck plant in Pontiac, Mich., it would add a third shift at its Allen County assembly plant, bringing 700 jobs to the region by April.

And after a private-equity firm brought Fleetwood RV Inc. to decatur, Ind.,  it announced in August that it would add 300 jobs to its workforce of 630 by mid-November.

The analysis is based on announcements of which  the newspaper was already aware, but it does provide a snapshot of the area economy. And John Stafford, director of the Community Research Center at Indiana University-Purdue University Fort Wayne, said the numbers jibe with statistics his agency is compiling.

“We’re just measuring audible sound,” he said, explaining that many smaller job decisions probably aren’t publicly announced.

Even so, the numbers reflect a tentative recovery in a regional manufacturing economy that fell further and faster than other sectors did.

In the first three months of 2009, companies announced 2,500 layoffs or cuts and 850 hires. In the second quarter, 4,560 layoffs and cuts were announced, compared with just 512 hires.

The region and the entire Midwest lost manufacturing jobs this year as companies cut production more quickly than sales plummeted, cutting deeply into inventories, said William A. Strauss, a senior economist at the Federal Reserve Bank of Chicago who compiles the Midwest Manufacturing Index.

“I think the financial crisis hit manufacturing more heavily than it did other parts of the economy,” Strauss said.

Car and truck sales, for example, fell 27 % in the first eight months of 2009 compared with the same period of 2008. But production was slashed by 46%, Strauss said.

The recession and tighter credit markets made it difficult for consumers and small manufacturers to get loans and do business. And it helped tip some huge companies – such as General Motors Corp. and Fleetwood Enterprises Inc. – into bankruptcy.

Auto sector’s shifts

The 2,600 workers at the Allen County truck plant were idled for 10 weeks starting in May as bankrupt GM struggled to reduce inventories. But after the new General Motors Co. emerged from bankruptcy court in July, inventories fell further than expected, thanks in part to the federal ”Cash for Clunkers” program.

In July, GM announced it would spend $46 million retooling the Allen County plant so it could make heavy-duty pickups. In August, GM said it was cranking up production in Allen County and at its Defiance, Ohio, foundry. Then in September, GM said it was adding a 700-employee third shift in Allen County.

Many of the new workers at the plant will come from the roughly 1,000 who lost jobs this month when GM closed its truck plant in Pontiac, but it still will be a boon to the regional economy.

Even though the biggest news in the regional job market for the quarter is the new auto industry jobs, the sector also accounted for the biggest losses.

GM announced in August that 175 workers – 115 in Allen County and 60 in Defiance – took advantage of a second round of buyouts offered this year to employees.

And in July, parts maker Meridian Automotive Systems Inc. closed its Grabill plant, putting 120 out of work.

For Fleetwood, orders have steadily grown since summer, said John Draheim, president of the new Fleetwood RV. The problem has been in getting parts.

“The supply chain has been fractured,” he said.

While most firms that directly supply Fleetwood made it through the downturn, some suppliers didn’t, causing disruptions.

“Occasionally we have to take some down days to let them catch up,” Draheim said.

Even so, Fleetwood’s staffing was “a little bit north of 850” last week and growing, Draheim said.

The third-quarter’s third-largest job addition also was in the RV industry. Sweden-based Dometic LLC announced it would move 116 jobs from Mexico to LaGrange, Ind., by 2012 to make retractable RV awnings.

Confidence grows

Overall, the net additions to the regional workforce in the third quarter were modest compared with the losses announced earlier in the year. Fleetwood, for example, likely will finish 2009 with about 400 fewer workers in Decatur than it had in 2007.

And some huge losses might loom. Navistar Inc. is considering buying an office complex in Lisle, Ill. Navistar won’t say whether it’s thinking about moving more than 1,000 well-paying jobs there from Fort Wayne, but the company has told Lisle officials more than half the 3,500 office employees would come from out of state.

Other than Fort Wayne, the only city where Navistar has a sizable white-collar operation is Knoxville, Tenn., where it employs 89, according to the company website.

But as the Federal Reserve’s Strauss meets with business leaders throughout the Midwest, he said things are slowly getting better.

“There has been a very significant change in terms of business confidence,” he said.

Jeff Rohyans of New Haven also is more confident. In January, he was laid off from the Parker Hannifin plant in New Haven. He drew unemployment for six weeks before going back to Parker Hannifin on temporary status in April and then moving to a temporary job at steel fabricator Almet Inc. in June.

He took more than a $3 hourly pay cut from the $14 an hour he made at Parker Hannifin. But after commercial construction starts to recover, Rohyans, 35, expects to be made permanent at Almet and to get the insurance and other benefits that come with it.

Judging from the train traffic he’s seen through New Haven, Rohyans said he feels the economy is on the mend.

“I like to use the phrase ‘cautiously optimistic,’” he said.

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General Motors Corp. Files for Ch. 11 Bankruptcy

June 1, 2009 by · Leave a Comment 

General Motors Corp. filed for Chapter 11 bankruptcy protection today (June 1)  as part of the Obama administration’s plan to shrink the automaker to a sustainable size and give a majority ownership stake to the federal government, according to the Associated Press.

GM’s bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The company said it has $172.81 billion in debt and $82.29 billion in assets.The fallen icon of American industrial might will rely on $30 billion of additional financial assistance from the Treasury Department as it reorganizes. That’s on top of about $20 billion in taxpayer money GM already has received in the form of low-interest loans.

GM will follow a similar course taken by Chrysler LLC, which filed for Chapter 11 protection in April and hopes to emerge from its government-sponsored bankruptcy this week.

The plan is for the federal government to take a 60% ownership stake in the new GM. The Canadian government would take a 12.5% stake, with the United Auto Workers getting a 17.5% stake and unsecured bondholders receiving 10%. Existing GM shareholders are expected to be wiped out.

President Barack Obama is scheduled to address the nation about GM’s future at midday from Washington, and GM CEO Fritz Henderson is to follow him with a news conference in New York.

Beyond the bankruptcy announcement today, GM is expected to reveal 14 plants it intends to close. One of those plants, however, will be retooled to build a small car.

GM’s filing comes 32 days after a Chapter 11 filing by Chrysler, which also was hobbled by plunging sales of cars and trucks as the worst recession since the Great Depression intensified.

The third of the one-time Big Three, Ford Motor Co., has also been stung hard by the sales slump, but it avoided bankruptcy by mortgaging all of its assets in 2006 to borrow roughly $25 billion, giving it a financial cushion GM and Chrysler lacked.

The downsized GM’s brands will be limited to Chevrolet, Cadillac, GMC and Buick. Its Pontiac, Saturn, Hummer and Saab operations will be either sold or closed. GM said it was finalizing a deal to sell Hummer, and plans for Saturn are expected to be announced within weeks.GM, whose headquarters tower over downtown Detroit, said it believed the filing was not an acknowledgment of failure, but a necessary way to cleanse itself in an orderly fashion of problems and costs that have dogged it for decades.

Trading of GM shares was halted early today after they plunged Friday as low as 74 cents, the lowest price in the company’s 100-year history. GM will be kicked out of the Dow Jones industrial average because rules established by the News Corp. unit that oversees the index prohibit it from including companies that have filed for bankruptcy.

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Rep. Souder: Saving Auto Suppliers Won’t Be Easy

May 14, 2009 by · Leave a Comment 

Congress is working to keep U.S. auto suppliers in business.

U.S. Rep. Mark Souder, R-Ind., delivered that message to a handful of local suppliers Tuesday (May 12) at the Goshen (Ind.) Chamber of Commerce, but pointed out that it’s not going to be easy, according to The Goshen News.

“The complexity on how to address this is huge,” Souder said following the two-hour closed-door meeting.

Souder, whose district covers northeast Indiana, has been meeting with leaders of General Motors Corp. and Chrysler LLC to understand their challenges and discuss finances, unions and the supply chain, among other topics. Part of what initiated the talks was a recent announcement from GM that any dealership that sold fewer than 30 vehicles or failed to hit at least 50% of its quota would be terminated. Dealers would then have a deadline of Dec. 31, 2010, to liquidate remaining items.

The announcement is another leg kicked out from underneath the supply chain, much of which operates in northern Indiana. Souder worries just how many more hits the area can take.

“If we lose our big auto companies on top of the (most likely partial) recovery in RVs, we’re looking at a catastrophic, probably irrecoverable impact on our area similar to Studebaker in South Bend,” Souder said. “On top of what’s happening everywhere else in housing and RVs, we’ll never replace the jobs we’re losing.”

Despite the negative atmosphere, Souder said he believes 50% to 60% of GM’s dealers will survive, and that GM, after going through bankruptcy proceedings, will also survive. He also believes Ford will survive, but doesn’t know what will happen with Chrysler, which has filed bankruptcy and signed a partial ownership deal with Italian auto manufacturer Fiat SpA, which is being handled to some extent by the Italian government.

At the same time, he noted that American auto companies are competing with foreign companies that are being financially supported by their governments in ways the United States hasn’t yet seen.

“It’s not like this is going to bounce back when you have every government around the world funding your competition,” Souder said. “Those countries view them as integral and a much bigger part of their country than even autos are in our country, so they are going to do everything they can to keep them from folding.”

He said, for example, although some American auto parts suppliers will sell to Japanese companies, Japan restricts the amount of American parts used in their vehicles, even if they are being built in the United States. Again, he said increasing our competitiveness will not be simple.

“You can’t just whip up barriers or China will pull out of our market and collapse our economy,” Souder said.

One way Congress is working to prop up the American auto supply chain is by trying to figure out how to use Troubled Asset Relief Program (TARP) funds to make a difference to keep the companies from shutting down.

According to chamber president David Daugherty, reaction to Souder’s statements from local suppliers was relatively positive.

“Most of them said, ‘we’re geared for it, we’re OK, we’re going to make it,’ so that was the reassuring part,” Daugherty said.

He said that, to an extent, nothing will change with the basic business of running the companies, and placement will be key.

“It’s going to be different when General Motors comes out of whatever they go through,” Daugherty said. “It’s one where you’re going to have to make sure you’re there, you’re competing, you’ve got the product and that your suppliers are getting you what you need to stay in the game.”

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Is V-8 Engine Headed for the Scrap Heap?

April 22, 2009 by · 1 Comment 

The V-8 engine, powerplant of choice for several generations of RVers and the public at large, may be going the way of leaded gasoline.
 
According to a report in Automotive News, a panel of experts speaking Tuesday (April 21) at the 2009 SAE World Congress believe that tightening emissions standards and volatile fuel prices could spell the end for a nearly century-old engine design that first piqued interest in a big way with the introduction of the Chevrolet overhead-valve V-8 in 1955.

At least one panelist, Mary Ann Wright, CEO of the Johnson Controls-Saft joint-venture battery company, referenced an April 17 ruling by the United States Environmental Protection Agency (EPA) that carbon dioxide emissions and other greenhouse gases endanger the public. The ruling is expected to lay the groundwork for further reductions in such emissions.
 
“You are going to see the discussion starting to shift to not only reducing fuel consumption but CO2,” Wright said.
 
As noted during the panel discussion, contemporary engine technology, combined with lighter-weight vehicles, improved vehicle aerodynamics and more efficient transmissions, would be able to effectively counteract the need for larger-displacement engines without adversely affecting acceleration and towing performance.

However, while speakers such as Don Kapp, Ford Motor Co.’s director of powertrain research and advanced engineering, extolled the virtues of such breakthrough technology as Ford’s EcoBoost – a twin-turbocharged 3.5-liter engine that produces 355 hp, about the same as a V-8 – no one apparently addressed the torque values of such designs. While V-8 engines are seldom used today in automobiles, they remain a cornerstone for light-truck sales due to the engine’s ability to create large amounts of torque – pulling power – at relatively low engine rpm. 
 
Developing technology wasn’t the only topic under discussion. According to Minoru Shinohara, a senior vice president at Nissan Motor Co., driver behavior is yet another factor in vehicle efficiency that needs to be addressed. Nissan is working on a number of in-car technologies aimed at improving feedback to the driver, including:

  • An accelerator pedal that pushes back slightly when speed is increased too much.
  • An Ecometer that keeps the driver informed about vehicle performance.
  • Carwings, a program that alerts drivers to traffic congestion along a computed route and selects alternative paths.

Other technologies presented included a chain-driven starter-alternator by supplier BorgWarner Inc. intended to eliminate fan belts. The company also is researching more efficient turbochargers and transmissions.
 
“Turbocharged engines offer 15% to 30% better fuel economy and as much as 20% reduction in CO2 emissions,” said Roger Wood, executive vice president of turbo and emissions systems for BorgWarner, in predicting that the use of turbochargers would grow by 135% by 2014. Meanwhile, Uwe Grebe, executive director for advanced engineering for General Motors Corp., suggested that smaller turbocharged engines could account for as much as 20% of the market by 2014. 
 
Ironically, Detroit automakers previously embraced turbocharging as a way of developing horsepower in smaller engines in the 1970s when Mideast oil embargos caused similar fuel cost spikes. But the technology was later abandoned in all but a few cases as fuel prices moderated.

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