The Washington PostDemocracy Dies in Darkness

When a factory leaves town: in the shadow of Silicon Valley, a city reels from job losses

Workers in one California town have become collateral damage in the push for globalization.

Construction of the new BART station Warm Springs/South Fremont is seen in Fremont, CA. The extension will provide better mass transportation into Silicon Valley. (Winni Wintermeyer/For The Washington Post)
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FREMONT, Calif. -Tony Camillo’s list of job leads filled a full page in a spiral bound Staples notebook, his own handwritten battle plan. The mission: return to the workforce. He was 54, a former autoworker at a plant that no longer exists. It wasn’t going to be an easy war to win.

There were 56 companies listed – a compendium of old economy and new high-tech and low, assembly-line jobs and office positions. They were culled from online advertisements, shoe leather research and old-fashioned networking – a broad net that Camillo cast as his unemployment benefits ran out late last year.

Coke. Georgia Pacific. Cisco.

“I got a friend that works there,” he said of the telecom giant as he ran down the list and made mental notes of his prospects. “A lot of companies are hiring.”

Though not on that overcast day. Tony Camillo was just one worker among many caught in an implosion that rattled this suburban town in 2010.

Camillo was a 19-year veteran of New United Motor Manufacturing, a once-promising joint venture between General Motors and Toyota. When the partnership collapsed, it set loose one of the U.S. economy’s most powerful engines – the one that destroys and creates jobs.

It is a force both vicious and profound, able to shake a community’s faith or help it prosper. The process is not pretty or without casualties. In any given month, the churn in the U.S. labor force involves millions of positions. The monthly reported statistic on job creation is only the net gain or loss – the tip of an iceberg built from the daily decisions of neighborhood entrepreneurs, banks, global corporations and workers themselves. A small business goes bust; a budding inventor finds an investor; a multinational corporation adds a factory shift or transfers work overseas.

Since the onset of the Great Recession, these interactions have become perhaps the chief concern of economic policymakers, from the inner circles of the White House to the Federal Reserve and beyond, all focused on one unanswered question: Can the U.S. economy ever again spin off the number and quality of jobs needed to maintain living standards for the middle class and, more broadly, the country’s status in the world?

When the NUMMI plant closed, Camillo and 5,000 others saw the vicious side of the machine in full flower.

They’d been earning an average United Autoworkers negotiated wage of around $30 an hour – well above the U.S. median – and “thought we’d be there forever,” Camillo said. “We had heard rumors for years and years. But we always thought there’d be a way to stay in business.”

It certainly seemed a durable idea when Toyota and GM announced in 1984 that they would team in a joint venture to marry the strengths of two world auto giants. Toyota would gain an expanded foothold in the United States, GM would get direct insight into Toyota’s vaunted management discipline.

But a partnership born of globalization would eventually be undone by it.

GM pulled out in 2009, as the pressure of a government bailout led it to restructure and shed entire brands – including the Pontiac line that was GM’s last product in Fremont. Toyota tried to go it alone, but as the economy softened the company made a series of decisions that showed just how flexible the global economy has become.

With excess capacity at its Japanese and Canadian plants, the company realized it could simply send production of the Corollas and Tacoma trucks it produced in Fremont to those facilities – at least in the short term. In the case of the trucks, the company could take advantage of a free trade agreement with Canada that allowed the vehicles to be assembled on the other side of the border but shipped back to the states without paying the steep import tariff the U.S. imposes on pickups.

The U.S. Department of Labor investigated and certified that NUMMI workers could receive retraining and extended unemployment benefits under a program for people who lose their jobs because of competition from imports or outsourcing.

There are millions of such cases on DOL’s books over the past 20 years: Fremont stands out as the Zip code with the largest such dislocation.

The program is a direct offshoot of U.S. political support for freer trade around the world – a recognition that, even if more open global markets make the world as a whole better off, the benefits will not be evenly distributed. There will be winners and losers.

The upside for some countries and for some U.S. companies and workers has been palpable – tens of millions lifted from poverty as the world’s production of clothes and cars and computers has been distributed around the planet; bigger markets for U.S. goods.

But the main reason economic globalization remains so controversial in U.S. politics is precisely because of the sense that the downside has fallen disproportionately on people such as Tony Camillo – older employees with skills who may be out of step with the current labor market, and who will probably be forced to work for less pay, if they can find work at all.

“The most challenging demographic is the person who has worked 30 years in one industry and the job has not only gone away, the industry is actually structurally disappearing,” Labor Department Secretary Thomas Perez said.

It’s a cycle Camillo is living through now. He worked for a while in an employment center set up to help former NUMMI workers find jobs. When that office closed, he began drawing unemployment. The benefits expired in December.

His résumé is up to date. But after a quarter-century of building Pontiac Prisms and Tacoma pickups, it’s not clear where that will take him in a part of the country that’s looking for code writers and engineers.

At the fringe of Silicon Valley, he and the city of Fremont itself have had to fight to keep a foothold.

A jobs exodus

When politicians and policymakers talk about how to promote job creation, one thing they often dodge around is how much of the process is out of their hands – and how easily the best plans can be subverted.

The NUMMI closing was bad enough for the folks who run Fremont. Losing that major employer was like losing an anchor. All of the plans – the tax projections, the benefit rolls, the sense of where the community is heading – become unmoored.

In Fremont’s case, the decision by Toyota to close the plant set a chain of events in motion that threatened not just the 5,000 immediate factory jobs, but the ability of the city to recover and generate new jobs to replace them.

It was for many reasons an uncertain time for the city. NUMMI was not the only major employer to go bust as the nation weathered an unprecedented economic crisis. Other companies were also scaling back or going out of business as part of what was, in effect, a massive readjustment of the U.S. labor force.

Jobs were being sent overseas, disrupted by imports or disappearing altogether – and not just in old-line industries like auto manufacturing.

Exhibit A: Solyndra.

The solar panel company had opened a manufacturing plant in Fremont in 2010, with the support of federal loans and with much optimism about green economy investments. But company officials said that the solar energy market had been so disrupted by China’s low-cost production and expanding supply that it could not remain in business.

It was not just the lost employment – another 1,100 jobs – or the suddenly vacant million square feet of office space that stung city administrator Frederick Diaz. It was the fact that companies like Solyndra were supposed to represent the future – a manufacturing firm in an emerging industry that had the full weight of the federal government behind it, and in which U.S. technology and know-how would presumably provide a competitive edge. Instead, it was another dead weight around the city’s neck.

How to recover?

Diaz and the city had a long-range plan that tried to take advantage of Fremont’s location at the north end of Silicon Valley, its proximity to San Francisco and the planned arrival of a new Bay Area Rapid Transit station in the town. The city had even agreed to help fund further extensions of the system toward San Jose – hoping that Fremont would become an attractive central point for housing and investment that was midway between the urban tech centers to its north and south.

That’s when the full fallout from Toyota’s decisions became apparent.

Shortly after the NUMMI plant closed, Toyota sold a major piece of its land, some 167 acres, to Union Pacific railroad. Under U.S. law, railroads are not subject to local zoning restrictions. That meant the rail company had full sway to do what it wanted with the property.

What Union Pacific planned was a rail yard – a proposal that Diaz and others felt would send their larger goals for the community into a tailspin by dedicating a prime piece of real estate to a decidedly old economy use.

As bad as the loss of jobs at NUMMI might have been, the suddenly available acreage spelled opportunity. But instead of a hub for new offices or plants, Fremont was facing 150 acres of hulking rail cars stowed at a facility expected to generate very few jobs.

“It was,” Diaz said, “a dark time . . . NUMMI? 5,000 jobs, overnight, gone. Solyndra, gone. Then hearing that NUMMI was selling – we were on pins and needles. Was it going to a developer? More sprawl? Then we heard it was a rail yard. Depressing.”

The only option: beg. At the source.

On a blustery April day in Omaha, Diaz and a team from the city arrived at Union Pacific headquarters to try to persuade the rail giant not to follow through on its plans for the property it just bought.

The meetings did not start well. Whatever hope Diaz brought in the door began evaporating when Union Pacific officials opened the agenda with a visit to the company’s operations center – a high-tech beehive, like the railroad equivalent of a stock trading floor, where company employees monitored the nation’s rail traffic.

The message was clear.

“We were dealing with one of the most powerful corporations in the country,” Diaz said. “We felt in a way even more vulnerable in asking for what was a regional need, and weighing that against what we saw was a big national agenda” to sustain rail capacity.

It was just the argument Diaz had feared – that the planning of a powerful company 1,600 miles from Fremont, and the coincidence of property becoming available at the same time Union Pacific needed it, would win out over the ambitions of small-town planners.

But the city’s presentation did strike home with the person who mattered most, then railroad chief executive James R. Young. He was only in the room for the last part of a three-hour meeting, but he gave the city a lifeline.

Fremont had a year to find buyers for the land. If none emerged, the rail yard would likely move forward – and the job market in Fremont be dealt yet another blow.

Repurposed buildings

Recession brings pain – job loss, dislocation and business failure – but here is what also happens: People like Joel Falcone start to gather résumés. He is the chief operations officer at the Excelitas company, and when he heard Solyndra was going out of business he knew it was time to think about hiring.

His company makes high-end products that manipulate light – allowing vehicles in space to dock by aligning photon beams, or “curing” protective glass onto electronic gadgets with ultraviolet waves.

Demand is booming, orders are increasingly customized and customers want ever shorter turnaround. With so many Solyndra engineers coming onto the market, he accelerated plans he knew would pay off – including bringing jobs back to Fremont from places like Singapore.

A tour of Fremont today makes it hard to dispute that the dislocation of four years ago has been matched by some dramatic adjustments in the other direction – none of which includes a rail yard.

Solyndra’s empty offices?

It is the planned home of a research facility for Seagate, the computer disk maker. Solyndra’s employees – which skewed young and highly skilled – were absorbed so fast into other jobs that local employment officials have not even kept tabs. Few turned up for benefits.

That big, seemingly outdated NUMMI building?

It’s now the manufacturing hub for Tesla, the electric carmaker that has filled out the space with its highly mechanized assembly line.

It remains unclear whether the trends seen at companies like Excelitas will define the U.S. economy’s next epoch or not. “Reshoring” remains a phenomenon at the margins of job growth, though executives like Falcone insist it is for real. Whatever Tesla’s fortunes, its shop floor is the province of robotic machines as much as manpower.

There is a high concentration of manufacturing talent in Fremont, Calif., allowing Excelitas to make high-end, light-creating components. (Video: Lee Powell/The Washington Post)

Companies are hiring here – investing, expanding, planning for growth. But they are also pushing for a level of efficiency that helps account for why, even in recovery, U.S. job growth is slow. It may make companies successful; but it also means stingy results for employment.

Next to Tesla, Thermo Fisher Scientific’s new drug testing and blood assay facility shows the dynamics at work. The company’s building is going up on land that would have become part of the rail yard – proof that the ideas Diaz and others presented to Union Pacific could bear fruit.

Thermo Fisher Scientific is hiring and expanding, and doing it on land once belonging to the NUMMI auto plant in Fremont, Calif. (Video: Lee Powell/The Washington Post)

Construction workers are busy finishing the facility, and the company’s workers are now assured their jobs won’t be sent elsewhere in Thermo Fisher’s global production system. Given the options, company spokesman Ron O’Brien said, it made the most sense to recommit to Fremont.

But just by redesigning and optimizing its operations – bringing under one roof employees that are scattered among several sites – the company estimates it can dramatically boost output without much additional hiring.

Workers will no longer have to make a 20-minute drive to go to the warehouse; the hours one employee spends ensuring that bottles on test liquids are properly sealed will be saved when a self-testing bottle-capping machine is designed into the new building; the two employees worth of labor devoted to manually folding test kit boxes will be eliminated with another machine.

That type of ebb and flow is happening across the country. The static snapshot can look depressing. Unemployment remains high, at 6.2 percent. But the flow underneath can sometimes paint a different picture – one that puts an even more nuanced light on globalization.

Those auto jobs that went to Canada and Japan?

They have since come back to Mississippi and Texas, where Toyota is expanding its production of Corolla cars and Tacoma trucks.

Ask Tony Camillo and the other former NUMMI workers about themselves and there is no doubt the adjustment has been hard. No central statistics have been kept about how many are now working. But anecdotally they say many have landed on their feet, often by switching to jobs in growing sectors of the economy.

The folks at NUMMI may not write code for Google. But a number have gotten jobs driving the “Google bus” that transports workers each day, or working at the local bus maker, Gillig, that manufactures them.

And Tony Camillo?

It took a while. But he has caught the same wave as so many others in this part of country. He is now a quality control inspector at Celestica, a computer drive and electronics manufacturer.

The wages are half what he made at NUMMI – about $14 an hour. And he has piled on as many hours as possible.

But he is back at work.

Schneider is now the Federal Reserve correspondent at Reuters News.