Indiana Auto Town Tells Recessionary Tale
Friday, May 29, 2009
KOKOMO, Ind., March 28 -- Over the last month, city officials in this auto-dependent town of roughly 46,000, 50 miles north of Indianapolis, wrote, called and e-mailed Washington to try to get the attention of Ed Montgomery, Obama's point man to help auto workers and their communities recover from the industry's downturn.
Thursday, they got their wish. Montgomery arrived with an entourage of federal bureaucrats and other politicians to hear the concerns of roughly 50 small-business owners.
"We've been affected by this downturn as much as anybody," said Kokomo Mayor Greg Goodnight. "We want him to hear our story."
Nearly half of Kokomo's economy relies on the auto industry. Chrysler makes transmissions and parts at four plants here, and Delphi -- the giant General Motors parts maker -- has a factory here, too. But in the past few years, the employment at those plants has plummeted to roughly 8,000 from 14,500, say city officials, and there have been layoffs at several suppliers who sell to the big companies. Altogether, the job losses have pushed Kokomo's unemployment rate to 13.6 percent.
"We can't get to a plan for the future because we get so bogged down in the present day," Goodnight said. "Chrysler bankruptcy, the massive layoffs. We're just keeping up with the bad news and the national economy."
Meeting at a center for high-tech start-ups, Montgomery heard from a Delphi retiree who worried about what was going to happen to his health-care benefits because the parts supplier is still in bankruptcy and GM may soon file. An accountant asked if there was any hope of his clients, many of whom supplied parts to the likes of GM and Chrysler, ever getting paid the money they are owed.
While Montgomery admitted he wasn't sure of the details of where Delphi's bankruptcy stood now, he assured the business owners that he heard their concerns.
"There is no doubt that auto communities, the workers and the businesses in Kokomo and other cities around Indiana are struggling through this economy," Montgomery said. "We understand the importance of Delphi and Chrysler and how it ripples through the whole community. These issues are very much on the forefront. We realize it is not just [the auto companies] but all of the related communities."
Montgomery and the head of the U.S. Small Business Administration said there will be an initiative to make loans more available and easier to get for car, boat and RV dealers -- many of whom rely heavily on credit to keep their businesses going.
In Kokomo, there were seven dealers in town seven years ago. Now there are four. "They were viable businesses, but their credit facility has said, 'No more,' " said Rex Gingerich, a major GM and Chrysler dealer in the area.
Not only are dealers hurting.
Jennifer Rozzi, who runs a catering business with her sister, attended the meeting with Montgomery. She said her sales were down 35 percent in the first three months of the year, compared with the same period last year. Some of her customers have postponed weddings. Others have scaled back food and decorations at their corporate events. And her once-steady business of doing boxed lunches for companies that were conducting training for Chrysler and Delphi has virtually disappeared.
But how much Montgomery or other officials can do remains unclear.
Ken Lucas, who owns his own furniture store in town, is worried the answer will be not much. His sales are down as much as 15 percent, as customers are buying less expensive items or simply not buying at all. He's cut three of his 18 employees and expects to make only a slim profit this year, if any.
"People in this town are nervous," he said. "I don't blame them." He said he is concerned that the stimulus money Washington is pushing is merely a "Band-Aid or painkiller that's going to wear off."
"I hope these guys making these big decisions are on target," he said. "I hope the stimulus thing they're doing works. I have my doubts."