November 19, 2008 12:00 am LANSING (AP) -- A quarter-century ago, Michigan's monthly unemployment rate hit 17 percent and so many laid-off workers headed to Texas that bumper stickers asked, "Will the last one leaving Michigan please turn out the lights?" As General Motors Corp., Ford Motor Co. and Chrysler LLC officials appealed Tuesday to Congress for billions of dollars in loans to keep them afloat, fears of a replay have residents feeling even gloomier in this hard-hit industrial state. The Detroit Three are headquartered here, and the state's fortunes have relied for a century on motor vehicles. Oakland County Executive L. Brooks Patterson said communities and schools would be devastated without the automakers. The county northwest of Detroit -- one of the nation's most affluent -- is home to Chrysler's sprawling headquarters, GM's Technical Center campus and a slew of auto plants and foreign and domestic suppliers that employ more than 40,000 people. "If GM or Chrysler goes under, or both go under ... it will be a nuclear winter. We'll lose tens of thousands of jobs," Patterson predicted. Michigan already has had to deal with a shrinking automotive work force, and domestic automakers likely will shrink further even if they get federal help as they continue downsizing. Since 2000, the number of Michigan workers making transportation equipment has dropped from 342,000 to 175,000, a decrease of nearly 50 percent. "Michigan has been bearing the brunt of these adjustments for eight years now. Unfortunately for the state, things are going from bad to worse now, because the financial woes are being laid over the structural changes," said Thomas Klier, senior economist with the Federal Reserve Bank in Chicago. "So it's a real double whammy." If GM or Chrysler head into bankruptcy or are sold off to other companies, the changes would affect auto suppliers, auto dealers and the retailers and real estate agents who sell auto industry employees homes, clothes and services when times are good. The state already is in the top 10 for home foreclosures and suffering from bad publicity with its largest city, Detroit, embroiled in sex and spending scandals. Any reduction in auto industry jobs and profits means less tax revenue for state and local governments and more demand for health care and welfare services. That's why Patterson and the mayors of several Michigan cities, including Lansing, Sterling Heights and Hamtramck, were in Washington Tuesday to lobby for the loans. More than 240 Michigan communities benefit from an auto-related facility within their borders. Hamtramck Mayor Karen Majewski said the GM and American Axle plants at least partially within the Detroit enclave contribute more than a third of her city's annual budget, critical to the city's way of life. "There's really, really no way to cut. If we expect people to live in a community with decent services, we cannot provide it if we lose this revenue," she said. So far, even with a monthly unemployment rate of 8.7 percent and the unfortunate distinction of having led the nation for the last two years in annual unemployment, Michigan isn't nearly as bad off as it was in the early 1980s, when a serious recession hit domestic automakers hard. Back then, state unemployment nearly doubled from an annual rate of 7.9 percent in 1979 to 15.6 percent in 1982, including one month -- November -- where it hit 16.9 percent. The auto woes caused state general fund revenues to drop nearly 7 percent in a single year from fiscal 1980 to '81, a loss of $335 million -- or $2 billion in today's dollars, according to Jay Wortley, senior economist for the nonpartisan Senate Fiscal Agency. Teachers and government workers were laid off as revenues fell, services were cut and many residents packed up and headed to Texas or other states where the recession's effect on the auto industry was less severe. "Those were pretty tough times," Wortley said. "The key is, again, for the economy to turn around so they (automakers) can sell some cars." That could be hard to do at a time when economists are expecting motor vehicle sales to drop this year to around 13 million from 16.1 million a year ago and when the domestic automakers are barely clinging to half the market, down from nearly 73 percent in 1996. Still, if the domestic automakers can hold on, there could be better days ahead for them and the state. When domestic automakers were doing well in the late 1990s, Michigan's unemployment rate dipped first below 5 percent and then below 4 percent, often bettering the national average. Decades of effort -- and the need for downsizing -- have made Michigan slightly less dependent on the auto industry. Even though it still accounts for a big share of Michigan's economy in revenues and wages, the domestic automakers make up a fraction of the Michigan work force -- just 3.6 percent of total payroll employment of 4.1 million, according to Wortley. Yet Klier said the Detroit Three are actually more concentrated in the Midwest, primarily in Michigan, than they've been in 30 or 40 years. The change has come about as domestic automakers shut down plants further away from their Midwestern base and as foreign automakers and suppliers set up headquarters and research-and-development centers here. The heavier concentration isn't necessarily a bad development. Klier expects research and development efforts will remain in Michigan, along with engineering, regardless of what happens with domestic automakers. And while many auto suppliers would be hurt if one of the Detroit Three goes under, some could survive on the strength of their contracts with foreign automakers, as long as they don't take too big a hit. "The role of Michigan as a center for the global auto industry is here to stay," Klier said. That's little comfort to those who worry that hundreds of Michigan communities could suffer if a domestic automaker crashes. Former Michigan Gov. James Blanchard, who took office in 1983 during the last major automaker downturn, said the state faces an "economic tsunami" if that happens. "Washington likes to beat up on the auto industry, and some of it is justified," said Blanchard, who as a Democratic congressman helped put the 1979 Chrysler bailout in place. But "whatever criticisms we have of management, that's no help to the workers and communities that will suffer if automakers go down. They don't need a bunch of lectures. They need help."
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