As GM withers, so do US towns that once depended on auto industry

[Marc]

From the International Herald Tribune

As GM withers, so do towns that once depended on auto industry
By Jeremy W. Peters and Micheline Maynard The New York Times
MONDAY, FEBRUARY 20, 2006

ANDERSON, Indiana:

General Motors once had so many plants here that it had to stagger their schedules so that the streets would not be clogged with traffic when the workday ended. At the city's peak, 35 years ago, one of every three people in Anderson worked for GM.

Now there is not a single GM plant left; just two parts plants that GM once owned still survive. Anderson, which had 70,000 people in 1970, now has fewer than 58,000.

But in many ways, Anderson is still just as dependent on GM as it once was. Only now, rather than being dependent on General Motors, the corporation, it is dependent on General Motors, the welfare state.

The company's generous medical plans, prescription drug coverage, dental care and pension checks are a lifeline for the 10,000 GM retirees and an untold number of surviving spouses and other family members who still live in the Anderson area.

They in turn help to prop up the doctor's offices, hospitals, buffet restaurants and shopping centers that might otherwise vanish along with the GM plants around the city that are fast becoming rubble. Anderson's GM retirees outnumber its remaining auto manufacturing workers by a ratio of nearly four to one. "When we all die off, this city will die," Jesse Lollar, 83, said last week as he finished an early dinner of lima beans and macaroni and cheese at the MCL Cafeteria in the Mounds Mall.

Other communities will start to look more like Anderson as GM carries out its plan to close a dozen factories and cut 30,000 blue-collar jobs by the end of 2008, in part by offering buyouts and early retirement packages. As in Anderson, the pain of the plant closings will be eased somewhat by the continued flow of GM benefits - although that flow is shrinking as the company moves to rein in its spending.

"General Motors is more than just a symbol of American industry," said Gary Chaison, professor of industrial relations at Clark University in Worcester, Massachusetts. "It envelops the towns where it operates, and people become dependent on it in those towns."

Three of those people are Lollar, a retired GM engineer, and his two brothers, Charles, 72, and John, 74 - who are also retired from GM, who have a total of 112 years of GM experience and have benefited from one of the richest retirement plans offered to working Americans.

That plan is becoming less generous. This month, GM told its retired salaried employees and their family members that it planned to cap its health care expenses at the same level as in 2005. It told them to expect to pay more for everything from dental and vision care to prescription drugs and doctors' visits, with details to come later in the year.

GM reached an agreement last year with the UAW on a plan that would make modest cuts in hourly workers' medical coverage. The plan still requires court approval.

"You just take it day by day," John Lollar said. "I just hope my benefits last longer than I do."

In Anderson, St. John's Medical Center, the city's biggest hospital, is already bracing for the impact of the changes. Over the past two years, 15 percent to 20 percent of its patients at any one time were GM retirees, a spokeswoman said last week.

Iva Hazelbaker, 96, who retired from her job on an assembly line 35 years ago, said that without GM, "we'd be in a heck of a mess."

Anderson's unemployment rate is 6.7 percent, near its peak of the past 10 years and well above the U.S. national average of 4.7 percent. Even so, the figure is misleading, said Patrick Barkey, director of economic and policy studies at Ball State University in Muncie, Indiana, because many people here stopped looking for work long ago and are not captured in the numbers.

"I think it masks the state of the economy and understates the degree to which the job picture has worsened," Barkey said.

Across the country, about 80 other communities have lost more than a third of their auto manufacturing jobs in the past 10 years.

A visit to Anderson, now a stripped- down shell of its former self, provides perhaps the starkest example of the damage that plant closings can do. Reminders of the once-mighty auto industry are everywhere - abandoned plants, a ghostly downtown and residents who speak with bewilderment and frustration about what has happened to the auto business.

Along with once being the country's biggest employer, until it was passed by Wal-Mart Stores in the 1990s, GM was a powerhouse when it came to benefits.

And even though GM stopped offering retiree health care coverage to new workers 13 years ago, it still provides medical benefits to 679,000 retirees, their spouses and eligible dependents, on top of the coverage it gives to 435,000 active workers. This costs the company an average of $5,000 a year per recipient.

Given the sheer number of people who will be affected, the impact of the company's health care changes will run far beyond those of steel makers, retailers, railroads and airlines that have already eliminated or trimmed the benefits that their workers had.

The impact of GM's decline is already clear in Anderson, where members of the United Automobile Workers staged a sit-down strike in 1936 in sympathy with the big one in Flint, Michigan, that was credited with winning GM's recognition of the union.

Anderson once ranked right behind Flint, where one of every two people worked for GM at the company's peak in 1978, as the city with the largest concentration of GM operations.

Back then, GM employed 22,000 people in Anderson making everything from headlights to horns; now only 2,600 jobs are left at a pair of parts plants, one of them owned by Delphi, which is operating under bankruptcy-court protection. Analysts have said the Delphi plant could soon be closed or sold.

The city's dependence on retiree income is a major concern for the mayor, Kevin Smith, who said Anderson had to attract new jobs if it was going to survive. That is why he has gone as far as Japan and is planning a trip to China to look for investors, armed with multilingual business cards.

"We realize those retiree pensions will not be here in the coming years," Smith said.

"That's why it's important that we are involved in new job creation that will employ the younger people now, too, and keep them in our community."

But there were few young people at the tables of the MCL Cafeteria last week. Its manager, Dan Cantrell, said about a third of his business came from GM retirees like the Lollar brothers.

Eventually, the retirees whose GM benefits are helping to prop up this place will be gone. As Jesse Lollar, the retired GM engineer, put it: "We're going to turn the lights off when we leave."

Jeremy W. Peters reported for this article from Anderson, Indiana. Micheline Maynard reported from Detroit.