Auto Industry Ailments Affecting More than Just Motown and Michigan

As lawmakers in Washington decide whether to allocate funds to help the ailing automobile industry, Michigan-based electrical distributors say they are in favor of government assistance for this core segment of their state’s economy. If the federal government doesn’t provide financial assistance to automakers, sources contacted by Electrical Marketing said they are concerned not just about the impact on Michigan, but also about possible ramifications on the general U.S. economy.

Pete de Steiger, CEO of Ray Electric, Sterling Heights, Mich., said automotive suppliers employ 800,000 people throughout the Midwest, not just in Michigan: "It’s not just a Detroit problem," he said. "The auto industry permeates the whole United States. It’s the largest user of domestic steel and other things. I just don’t understand these guys in Washington not taking this thing a little more seriously."

While de Steiger believes the auto industry is a national concern, he sees the impact of the troubled auto industry on his local community in southeastern Michigan. While the housing market dried up two years ago, de Steiger said Ray Electric still enjoyed a fair amount of commercial construction last year. "Now that has even slowed down a lot," he said. "Everything has slowed down across the board for us on the construction side. And it’s all related to what’s happening with the automotives."

de Steiger knows many people working in the auto industry who have lost their jobs, getting buyouts or are seeing big cutbacks in their departments. "I’ve got friends who are working at the automotives just getting dumped on in terms of workload," he said. "It’s a very negative morale situation. There is a lot of anxiety on everyone’s part. People are getting laid off and don’t have any discretionary money to spend on anything."

Joe Schneider, president, Madison Electric Co., Warren, Mich., said sentiment is strong in his local community that the federal government should help the ailing auto industry. "It really does affect everybody in Detroit, from housing to commercial building," he said. "The attempts to get the money to the street through the financial market are not showing any signs of happening."

He said studies show every direct job at an automaker in the United States creates five more jobs, according to the Center for Automotive Research in Ann Arbor, Mich. Two of the five are related to suppliers or dealers; the other three are spin-off jobs at businesses where auto industry workers spend their paychecks.

According to the Center for Automotive Research, the domestic car companies and their suppliers employ some 600,000 line workers. It estimates the jobs of 3.6 million people are potentially at risk when you add in companies that indirectly rely on the auto industry for jobs.

Schneider is seeing the impact of the troubled economy on his own business. Madison Electric’s business dropped off sharply in October after running slightly ahead of last year, year-to-date. About 7.5 percent to 10 percent of the drop-off was probably related directly to the automotives, he said.

One Detroit area manufacturers’ rep said Detroit is having more trouble than the cities in Michigan where pockets of construction activity still exist. This rep said Lansing is a little busier than Detroit and that Grand Rapids has some projects going. There’s also a lot of spending on hospital and healthcare in Ann Arbor, home of the University of Michigan, he said. "But it’s the tri-county area of metropolitan Detroit where the landscape right now seems to have everybody concerned. I think the big thing is there are so many people involved, from the employees to the management. It’s one of those things where everybody knows somebody who is going to be affected."