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Market once drove region to prosperity: FOCUS: AUTO INDUSTRY
[August 06, 2007]

Market once drove region to prosperity: FOCUS: AUTO INDUSTRY


(Buffalo News, The (NY) (KRT) Via Thomson Dialog NewsEdge) Aug. 6--General Motors was almost too healthy for its own good back in the 1950s, when George Nash worked at its Tonawanda plant.

"We had so much of the market, they were trying to break us up," said Nash, an engineer who retired in 1980. "I think I had the best years of GM."

All of Western New York could say the same. Having supported generations of area residents -- including three generations of Nashes -- GM is fighting for its life. So are its suppliers and the rest of the U.S auto industry. Squeezed between global competition and their own "legacy" costs, domestic automakers lost a combined $15 billion last year, and their suppliers are plagued by bankruptcies.



A chance to change course -- at the risk of a costly strike -- comes next month, when the contract with the United Auto Workers expires.

"Every negotiation is important, but this one is very important," said Tom Fricano, former director of the UAW's Buffalobased Region 9 and a former member of its national board in Detroit.


Hanging on the outcome are more than 7,000 local auto plant jobs and an estimated 12,000 to 15,000 retirees -- but they aren't the only ones. If you pay taxes in Western New York or just live in one of its solid neighborhoods, you too have a stake.

"It's not a matter of getting rid of a few blue-collar workers," Fricano said. "It's also engineers, designers -- there's economic impact -- especially in a town like Buffalo."

GM, Ford and their suppliers pumped more than $6 billion in wages into the local economy since 2000, plus millions more in pensions and benefits, figures from the state Labor Department show.

The economy has rebounded from past crises in steel and the steady loss of manufacturing, economists say. But the effect of industrial meltdown can be wrenching.

"The relatively high-paying jobs in manufacturing are at most risk," said Richard Deitz, regional economist at the Buffalo branch of the Federal Reserve Bank of New York . "For those people, the niche they've carved for themselves is going to be hard to replace."

Western New York is a hub for auto part-making, mainly for GM, putting it in the crosshairs of the industry crisis. The region has three times as many jobs in the sector as the average metropolitan area, according to the U.S. Bureau of Labor Statistics.

The GM plant where Nash worked, setting up production lines for new engines, has about 1,900 jobs.

Delphi's radiator plant in Lockport employs about 3,000 and American Axle & Manufacturing has about 1,300 at three area plants.

In addition, Ford Motor Co. has about 1,100 jobs at its metal stamping plant in Hamburg. Their retirees outnumber active workers because of heavy attrition in recent years.

Since its peak in 1979, the industry has shed some 16,000 jobs locally.

While the parts-making adds up to a relatively small piece of the regional economy, it's a piece that would be missed. In Lockport, for example, GM spinoff Delphi Corp. pays 4 percent of city revenues and about one-quarter of the costs for water services.

"We're so glad they're here," said Mayor Michael Tucker -- who worked at Delphi himself for 28 years before taking a retirement incentive.

Perhaps more important are the sector's relatively high paychecks, which bolster regional sales and property tax revenues as workers spend their high disposable income. Pay averaged $72,000 including overtime and premiums in 2005, more than double the region's median wage of $29,260. Last year the average soared to $84,740, boosted by buyout checks.

Families built on GM

Nash moved here from Illinois in 1938 for a job at GM's newly built engine plant beside the Niagara River. His education in plant engineering came from GM's in-house university.

"At the time, there was a question if I would ever go to college, because of the money," he said.

But once on track for a degree and a job, he married his high-school sweetheart from back home and started a family in Tonawanda.

GM's support for his family didn't end there. The automaker also provided salaried jobs for his son, Bob, and grandson Tim. Bob Nash came to work at GM's forge in Tonawanda in 1973 as supervisor for a brake pedal production line, staying until retirement in 2004. Now his son Tim works as a maintenance supervisor at the forge, which GM sold to contract supplier American Axle in 1994.

Since the elder Nash retired in 1980, GM's pension has been the mainstay of the comfortable life in a shaded brick house near Ellicott Creek. The three generations of his family own 21 antique cars between them -- all GM makes, except for one 1931 Model A Ford.

But it's a good bet that the Nash family tradition will end at three generations.

The auto industry has slashed jobs, pay and benefits, and the outlook is for more of the same after the labor contract expires Sept. 14. The companies that used to be called the Big Three are looking for more concessions from autoworkers who have already given, making a strike a possibility.

The stark reality facing GM is an hourly labor cost of $73.26, counting benefits, about $25 an hour higher than its offshorebased competitors. Other domestic companies paying traditional autoworker wages are in the same boat.

The UAW says labor is a small part of overall costs, but makers see it as imperative to bring their costs closer to those of their rivals.

One possible move will be to try to offload future health care obligations onto a separate fund, in return for a one-time payment. Ford, the biggest money loser in 2006, will also be seeking deep cuts from workers, analysts expect.

"It's not like [autoworkers] can go to the manufacturers and say, 'You guys are doing great' -- the manufacturers are really struggling," Bruce Belzowski, senior research associate at the Transportation Research Institute at the University of Michigan.

But neither are the autoworkers in a mood to make more sacrifices, having seen their ranks decimated.

Locally, 3,000 workers have taken buyouts from area plants just since 2006. Another 1,000 at Delphi in Lockport face a 40 percent wage cut, under a controversial agreement between the company and the UAW. One in three production jobs vanished in the past five years.

An army of retirees

GM has nearly four retired workers drawing pensions and benefits for every active worker.

By contrast, competitor "transplant" automakers based overseas have about 1,200 U.S. retirees. GM's bill for health care is about $4.7 billion a year -- about $1,100 per vehicle sold in the United States.

While automakers are crunched, domestic parts makers are faring even worse, with several, including Delphi Corp., floundering in bankruptcy. American Axle & Manufacturing is profitable but says onequarter of its U.S. capacity is idle and plans to shut its biggest area plant in Buffalo.

American Axle's Delavan Avenue plant in Buffalo is set to close early next year, and has already won a cut in its tax assessment. The reduction slashed the plant's $531,000 city and county tax bill nearly in half.

Factories are a tangible reminder of the auto industry's imprint on the area. Less visible is its role as the source of livelihoods for generations of residents, like the Nash family.

It wasn't George Nash's plan to remain in Western New York and root his family here.

But, he said, "I had such a good job, I didn't want to leave."

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