Detroit Feels Pain Of Big Three's Troubles
LIANE HANSEN, host:
The industry's current financial problems are affecting more than just the automakers themselves. The Motor City and its residents are suffering, too. We're joined by Sarah Webster, a reporter with the Detroit Free Press. Welcome to the program, Sarah.
Ms. SARAH WEBSTER (Reporter, Detroit Free Press): Thank you, Liane.
HANSEN: Just how bad is the situation among the automakers in Detroit today?
Ms. WEBSTER: I think it's safe to say that it's as bad as it's ever been, probably even worse than in the '70s during the oil crisis.
Ms. WEBSTER: Well, if you consider during the first half of the year, sales were their lowest level in 15 years. and in the second half of this year we're expecting them to be even lower. More critical is that the fact that Detroit's having to transition from selling big trucks and SUVs to cars, and you can't really shift your production capacity overnight when you have these huge factories. It takes a lot of time and investment. And Detroit was really caught unprepared by the shift in the market.
HANSEN: So what effect has this had on the city?
Ms. WEBSTER: It's been intense. It's been a seismic shift. I mean, this has been four, five years straight of restructuring after restructuring, constant job losses. And I can tell you that it's taken an emotional toll on the people here. I mean, when lose your job now, you're not going to find another job here. You have to go down south or out west and you're going to have to just deal with the fact you're not going to make the kind of money you made here. You're going to have to say goodbye to your family and friends. You're probably not going to sell your house. It's a really a change of life for people and they recognize that and they feel - I think many people feel here like the American dream is dying.
HANSEN: How many jobs have been lost, a ballpark?
Mr. WEBSTER: Presently in Michigan, there are about 400,000 and 30 people unemployed. I would say probably the vast majority of that is tied in some way to the auto industry. But it's become just a very sad place to be. You constantly hear it. I went to the hairdresser's the other day. Even she was taking about it. You go to the grocery store you hear it. You hear it at the line at Starbucks. And people are trying to keep a normal way of life here but it's not normal, it's not business as usual here.
HANSEN: Ford recently announced that it was planning to cut 15 percent of its salary-related cost, that includes cutting jobs. In your opinion, do you think there are going to be more job losses?
Mr. WEBSTER: It's hard to see if the economy doesn't turn around next year how they will be able to - Ford, GM or Chrysler - be able to not lay off more workers. At this point, you know, they're getting kind of bare bones. You talk to some of the engineers who are working on the cars and trucks of the future and they say, you know, we're short-staffed already. We don't have the resources we need. And it's just becoming incredibly strained for them to do the work that needs to get done.
HANSEN: When did you foresee signs that Detroit was in trouble?
Ms. WEBSTER: I moved to Detroit in 1999, and it's hard to believe, but in that year, all the workers got 8,000 dollars bonuses at Ford, and they actually had planes flying around town thanking workers for their great contribution. But I would say in 2005 is really the demarcation point. That was, if you recall, there were hurricanes that hit the Gulf Coast in the summer of that year, and gas prices spiked over three dollars a gallon. And that was really the first kind of hint of the things to come.
And the automakers, in early '06, announced restructuring plants because they had started to see the shift away from SUVs and trucks. But they really didn't go far enough and they sort of underestimated how quickly and how far people would go back to cars and smaller vehicles. They had enough time, if they had gone ambitiously enough, to turn it around but they just didn't. You know, hindsight is 20/20 and we can all say, oh, gosh, why they didn't they do it? But you know, they have a lot of other considerations and a lot of resources that have to go into restructuring plants and they just didn't go far enough.
HANSEN: The economy, as we mentioned, is generally in pretty bad shape. Do you think it's having a worse effect on Detroit?
Ms. WEBSTER: Well, there is no question that Detroit is feeling the brunt of this. Just consider the unemployment rate in Michigan is 8.5 percent. That's three full percentages points worse than the country. Last year, Wayne County, which is the county where Detroit is located, had the worst foreclosure rate in the country. Housing is so bad here that a lot of the banks that now own these foreclosed properties are having bulk sales where investors from Hong Kong and California are coming in and buying like 20 to 100 homes at a time because there are so many distressed properties at such low price tags that they can just walk in and gobble up a whole bunch of properties at once. There is severe financial distress here.
HANSEN: Are there are any promising signs?
Ms. WEBSTER: I personally, despite all the troubles that I write about day in and day out, really believe that Detroit will longer term be fine. There is so much construction going on, it really is a kind of - a sign that some people with resources do believe in the future of this town. We have all these historic hotels that are being renovated. There are better cars and trucks coming out of Detroit's automakers now, and we'll be seeing some of those in 2010 and 11 and 13. I do believe that these companies are going to be fine in the long term.
HANSEN: Sarah Webster covers the auto industry for the Detroit Free Press and she joined us from member station WDET in Detroit. Thank you very much, Sarah.
Ms. WEBSTER: Thank you.
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