Detroit, the “motor city”, sinks into the crisis

Hamtramck, a neighborhood north of Detroit, seems to be abandoned. Closed shops, dilapidated facades, rutted streets surround the main point of activity in the area, the General Motors factory, where Cadillac and Buick sedans are manufactured. Twenty years ago, 5,500 workers worked there. They are down to 1,400. And 500 of them will lose their jobs again by the end of the year. “We built the city” proudly recalls the logo of Local 22 of the all-powerful Union of Auto Workers (UAW). Today, the city is being destroyed at the same time as its automobile industry is collapsing.

“The factory has just closed for two weeks, we’re going to close two more weeks in November and rumors say we could shut down the whole month of December. Our cars don’t sell. It is the consumer who dictates our activity, ”observes, fatalistic, George McGregor, the president of the local union, after a glance at the evolution of the Dow Jones index on his computer.

Affected by a historic fall in the auto market, the “Big Three” of Detroit, General Motors, Ford and Chrysler, are increasing short-time work, plant closings and job cuts. Rising fuel prices at the start of the year and the credit crunch caused sales to plunge 25% this year. Americans shun large sedans, 4x4s or pickups, favoring small models that consume less fuel.

After cutting more than 100,000 jobs in two years and shutting down 35 factories, manufacturers are announcing new workforce reductions almost every week. Over the year, GM and Ford will have reduced their American staff by 15%. GM has just announced that it will have to resort from the following month, for the first time, to dry layoffs, after 5,000 effective departures on November 1. Chrysler is cutting a quarter of white-collar jobs. And the ongoing discussions on a merger between General Motors and Chrysler raise fears of the worst: 30,000 to 45,000 jobs would be at stake. The president of the UAW union has spoken out against but some are starting to think that such a merger would be a lesser evil compared to the outright bankruptcy of General Motors, risk that no one will rule out.

“No improvement for two or three years”

“We are going through the worst crisis in twenty years and it will only get worse,” predicts Kristen Dziczek of the Center for Automotive Research. Projections do not show improvement for two or three years. However, car manufacturers are strapped for cash. GM has at best only twelve months ahead of it, Ford eighteen months. The stake is as important as that of the financial system: one in twenty jobs in the United States depends on the automobile. ” GM and Chrysler are negotiating with the government in aid of up to $ 10 billion as a wedding gift to finance the restructuring.

As the United States enters a recession, Michigan has been there for five years. Its unemployment rate is the highest in the country: 8.9%, compared to 6.1% on average. So far, the increase has been relatively muted as the majority of auto job cuts have been through retirements. The other employees benefited from generous severance packages of $ 40,000 to $ 140,000 through their golden contracts. Today, manufacturers no longer have the means. The golden age of the highly paid, union protected auto worker is coming to an end.

Randy Hudson, 51, left Ford after thirty-one years at home on June 1. “I used to earn about $ 100,000 a year, but with the increasing number of weeks of unemployment my salary has halved. I could no longer pay the loans for my two houses. I couldn’t face it anymore. ” Since then, one of his two houses has been seized by the bank and Randy is considering going into personal bankruptcy, a provision offered by US law to write off his debts or reschedule them.

Charles Schneider, lawyer, specializes in personal bankruptcy in Livonia, a middle class suburb west of Detroit. He actually sees about 35 a month. More than half relate to automotive employees, the others to real estate professionals, credit brokers, entrepreneurs or even restaurateurs or traders. “The auto crisis is causing chain reactions. The closure of a factory affects the entire economic fabric. The surrounding shops and restaurants are closing. And from Detroit, the crisis has spread to all the surroundings, even the more affluent suburbs, ”says Charles Schneider. A car job provides a living for four others.

Massive vote for Obama

Detroit has no heart for the centennial celebration of GM and that of the Ford T this year. “Motor City” of a million inhabitants has lost half of its population, left for the suburbs or the happier states. A third of the inhabitants, black for more than 80%, live below the poverty line. Home foreclosures are among the most numerous in the country, leading to the abandonment of streets or entire neighborhoods. 18% of the city’s housing is empty. The municipality, whose tax revenues are collapsing, must cut its public services to fight against an endemic deficit, at the risk of allowing crime and poverty to grow.

The economic situation is the number one concern of Michigan residents as the election approaches. Democrat since the last four elections, the state is preparing to vote overwhelmingly for Obama. McCain even stopped campaigning there since early October. The Democratic candidate proposes to rebuild the automobile industry thanks to a vast plan of assistance to the clean vehicle. An envelope of 25 billion dollars has already been voted to help convert the production tool to this new situation. The GM plant in Hamtramck is to produce the new Chevrolet Volt hybrid (electric and gasoline) from 2010. But, as unionist George McGregor points out: “The only question is: are we going to hold on? until there ?”