[ChiragM]

Early in the morning on Nov. 26, 2018, Dave Green, the president of Local 1112 of the United Auto Workers, which represents workers at a General Motors plant in Lordstown, Ohio, received a call from the plant’s personnel director. Green needed to be at the plant at 9 a.m. for a meeting.

“Management walks in 15 minutes late,” Green recalled, “and they say, ‘Hey, we’re going to unallocate the plant’ — that was it.”

The Cruze was finished, and G.M. had no plans to make anything else at Lordstown. Green followed the managers to the production floor, where they shut down the assembly line before repeating the same brief message to more than a thousand workers. “Some people started crying, and some people turned white as a ghost and looked like they were going to throw up,” Green said. “It felt like, ‘Oh, the end is coming.’ ”

On that same day, Mary Barra, the chief executive of G.M., announced that the company would unallocate four other North American plants and cut roughly 6,000 unionized hourly positions and 8,000 salaried positions. The largest affected plants manufactured sedans, and sedans would no longer be a major part of G.M.’s domestic production; instead, the company would focus on building S.U.V.s and trucks, which generate much higher profits.

Barra’s decision reflected many trends: declining small-car sales, an increasingly overvalued dollar that makes American exports more expensive and the continuing rise of American automobile manufacturing in Mexico, where autoworkers make an average of $2.30 an hour (last year, G.M. became that country’s largest vehicle manufacturer). It was yet more evidence of G.M.’s retrenchment from American manufacturing; since 2005, the number of states with active G.M. assembly plants has fallen to seven from 16.

A recent study by the Center for Economic Development at Cleveland State University estimated that the elimination of all three shifts at the plant would ultimately cause the loss of nearly 8,000 jobs and more than $8 billion in economic activity in the regional economy. And since the 2008 financial crisis, wages in the area have fallen by 6 percent, even as they have risen nationally by 11 percent.

Since 1966, the Lordstown plant has produced more than 16 million vehicles and more than a dozen different models, including the Chevy Impala, the Chevy Vega, the Pontiac Sunbird, the GMC conversion van and the Chevy Cavalier. G.M. cars and trucks are ubiquitous here, especially the fuel-efficient Cruze, which, at a time when gas prices were high, helped lift G.M. out of bankruptcy. Though profit margins are thin on the Cruze, it remained one of the company’s biggest sellers; last year, G.M. sold 143,000 Cruzes in the United States, the sixth-highest in volume out of the 38 models the company sold here.

Now the workers would be jobless. Some planned to go back to school or hunt for a new job nearby, while many feared the arrival of an “involuntary job offer” that would force them to relocate to a specific plant or lose their benefits. Some held out hope that the union leadership in Detroit would be able to undo the unallocation decision. In February, the U.A.W. filed suit against G.M. in federal court, arguing that “unallocating” the plants is a synonym for closing or idling them, both of which the union asserts are prohibited in the current four-year contract that expires this fall. As that suit moves forward, the U.A.W. has promised to fight hard to save Lordstown in contract negotiations planned for this summer.

G.M. announced that the final shift at Lordstown would be on March 8.

As the March 8 stop date drew closer, union meetings grew more fraught. Members were fearful about the future and angry at G.M. and Mary Barra, who they noted received nearly $22 million in compensation last year. Some were frustrated over the union’s diminished leverage.

Dave Green spent many of the days leading up to March 8 fielding desperate calls from members seeking advice on whether to put in for a transfer to another plant or to stay put on the chance that G.M. would give Lordstown a new car to build. At the transition center, laid-off assembly-line workers help members obtain unemployment benefits, improve résumés, find job openings and apply for plant transfers, a speculative process that offers no guarantees. U.A.W. members can request a transfer to another G.M. plant if there is an opening; priority is given based on seniority. A U.A.W. worker who was hired before October 2007 receives a pension after 30 years of service. For someone who has worked full time at G.M. for, say, 24 or 25 years, it is difficult to throw away those years of investment.

This had already been happening for many years with other G.M. plants that have been idled or closed. One worker at the transition center, Christina Defelice, said she knew plant workers who arrived at Lordstown after four other transfers, or had been commuting from Pittsburgh or even from as far as Tennessee to keep their families on their health insurance or make their 30 years. She said she knew of a number of divorces, nervous breakdowns and even three suicides caused by such dislocation. Now those out-of-town transplants might have to move on again, joined by hundreds of Lordstown’s newly unallocated workers.

The last Cruze came off the line on March 6, two days ahead of schedule. That afternoon, workers gathered on the shoulder of a turnpike exit next to the plant for a celebratory protest. Dave Green and a few others gave brief speeches, and a local folk singer played a version of Bruce Springsteen’s “Youngstown,” with revamped lyrics to reflect Lordstown’s struggles. Afterward, people ran into the road, whooping and hollering at the honking cars and tractor-trailers before dispersing in the bitter cold.

The last Cruze remained inside the plant, awaiting a final inspection. By then, it had already come to be much more than a car. It was a token of the most coveted working-class possession: a secure, well-paying job with health insurance and a pension.

Source: The New York Times Magazine

[CrAzY dRiVeR]

On a very related note, I'd recommend the book - Janesville : An American Story which deals with this exact same theme - the economic, social and political impact of industry decisions such as a closure of a manufacturing plant on an entire community.

The subject being the closure of General Motor's plant in Wisconsin, ripping the town apart - with unemployment, bankruptcies and a total loss of hope, resulting in a decade long process of slow recovery.

The writer takes you through the struggles of real people as some took on part time jobs, some took up much lower income jobs, some reskilled themselves to be relevant, some took up jobs in other cities to feed their families etc.

We (myself included) have easily remarked that companies should just shut shop and leave (some because of low sales, some because of no relevant new model introductions, some for their Chinese origins etc) - but articles and books like these provide an eye opener on how such small decisions (from a market perspective) can be catastrophic to the whole economy. The investments they made, the credit they have taken, the number of staff they have, the local vendors they worked with, the advertisement revenue they pump in, the dealers and service centres they contracted, the SAs and technicians they employed - take all of this out of the equation and suddenly the loss appears much bigger than what the monthly sales numbers would suggest.

[digitalnirvana]

Really interesting thread, thanks for starting this Chirag. Closer home I have seen two such instances - one in Singur and the other at HindMotor. This being a non-political forum I can't go into details of the ills that plague these places. Singur to be fair never became an automobile manufacturing town so its fate is perhaps not as sad as that of HM which died a slow inevitable death, nevertheless the stillborn TML factory (before it was pulled down) in Singur was a sad sight from the highway.

Visitors to Kolkata and urban explorers (and photographers with a penchant for capturing the melancholy) don't even have to go that far actually.

Exit the Howrah train station and take a walk/drive on Foreshore Road. It runs along the bank of the Hooghly in Howrah, once called the Sheffield of the East, and is a living testimony to what happens when industries shut shop en masse - leaving behind derelict and crumbling sheds, godowns and factories. Gloomy and forgotten.

[SamitMukherjee]

I don't know about car companies, but I have seen many big companies with huge township, giving away quarters to staffs who took VRS or were affected by the company's shut down.
Also, I have seen companies, whose quarters are lying idle over decades and have become haunted places.

[alpha1]

Well it is the natural course of economics which dictates that when you ain't making profits you shut down your operations.

HOWEVER, my biggest grouse on the lay-offs / shutdowns / downsizing etc is the information asymmetry.

Typically and usually the management has a foreboding about un-profitable business operations; however in the name of "corporatized" pandering to the stock markets: financial figures are window dressed and the an appearance of "everything is all right" is portrayed to the world.

Surreptitiously, alternate means of doing business are explored and analyzed; the outcome of which can be downsizing, layoffs, offshoring, outsourcing, shutdowns.

The employees only have a grapevine channel to rely on ... and perhaps be prepared.


So much for the glory of capitalism for the greater good of the society - one should not forget that the basic calculations about economic utility in capitalism that leads to greater good is information SYMMETRY. Which is utterly lacking in corporate world.


###


No, I am not a victim here, neither am I a socialist or "worse" ... a communist.

[Samba]

I can relate with this topic.

I have witnessed the closure of HM factory.

Few facts i witnessed.

The township had -

Managers bungalows, officers quarters, labor quarters and they had their sub divisions.

A dedicated railway station.

A market.

Two schools.

A hospital.

The downfall-

Till mid 90's they had a gala time.
From late 90's the sales started declining. Company started having trouble paying their employee's. So from around 2003 they started giving the option of taking VRS.

Few took that opportunity and shifted to other companies. While few opted to stay back.

From 2008/2009 they started to stop the regular production and started to pause the production in-between, for 2-3 months. During that period many employee's lost their jobs.

From 2012 the company was almost at the end stage and was running in so much loss, that they were not able to pay the salary. 3-4 months of salary used to get pending for the employee's.

Finally in 2014 they decided to shut down. Thousand's of employee's who were still there, lost their jobs.

Most of them left their quarters and bungalow's and few preferred to stay back.
From 2016, HM have cut the electricity in their township. So at night the township looked like a ghost town. This induced many more to leave the township.

Now finally 80% of the bungalow's and quarters are getting demolished.
Fox, snakes and wilds cats happily take shelter on the remaining buildings.
The factory machines are rusted and useless now.
The hospital has shut down.
The market place is long gone.
Both the schools are still running independently.
Stoppage of most of the trains in Hind-motor station has now been withdrawn.

[pganapathy]

This is the multiplier effect in action. When you create one job, you add more than just that salary into the system. Similarly, job losses/factory shutdowns have a negative multiplier.

It is not fun to watch, but it is an effect of market economics. If you want products of the best quality at the cheapest cost, then factories will go where cost and quality work out best. Otherwise you wind up with bad quality and highly priced products.

Sad to see entire towns suffer because one factory closes down, but it also reiterates the old saying, "Never put all your eggs in one basket". When times were good and jobs were available, towns like that should have diversified and tried to create other opportunities.

[kiku007]

When UAW killed the golden goose.

You can read more here,
https://www.amazon.com/Once-Upon-Car...sr=1-5-catcorr

https://www.amazon.com.au/American-I.../dp/B005723KGW

Or just a small account here,

https://cei.org/2013/07/29/empire-of...killed-detroit

"A 2008 report by James Sherk of the Heritage Foundation found that the average UAW worker at the Big Three earned $75 an hour, including wages and benefits, “$25 to $30 an hour more than American workers at [non-unionized] Japanese auto plants.” Union contracts also allowed “surplus workers” — in other words, workers who were no longer needed — to collect nearly full salary while they remained idle."

[sridhu]

The two closures I am aware of are

1. Closing of the Standard Motors factory at Perungulathur. My uncle was employed there and never found a job again. Brought up 2 boys & educated them thru Engineering. Tough times and completely shattered his confidence. He is now about 80

2. Jawa factory in Mysore. I only saw tangential impact of this. My cousin was in Dunlop , which was supplying tyres to Jawa. Did not lose his job but career did get affected. Had to travel around the country, change jobs etc. Ended up in Iraq for a stint. Guess it broadened his horizons and wasn't a totally bad thing to happen to him

While it looks like the end of the world, it probably is just another event in life. People will pull thru.

[ninjatalli]

I have read several stories of closure of factories and industry specific slowdowns in the US and the largely but locally impacted population. While this is definitely going to be the norm going ahead given the global movements of corporations on more towards profits in the absence of proper regulations, I wonder if the American media pulls up the notch on the sob stories.

Or the other way to look at this - does the media across the rest of the world remain more silent on such closures - we have several examples across the breadth of different industries (automobiles, textiles, consumer durables, mobiles, etc); but I don't remember reading a lot of detailed articles on the impact on the local population.

Or I wonder if I'm missing something here.

[hrman]

Heart goes out to them. I guess this is to be expected due to economic slowdowns the world over. Less or no demand leads to falling sales, profits and thereby leads to loss of jobs.
I happened to visit Kirloskar factory in Harihar (15000 jobs lost) and many other examples.
What used to be a self sufficient township is in a pathetic state. Nothing much except memories for people who used to work there, stay there, have schooling and medical treatment in the same ecosystem.
I was associated with a large Dutch electronics MNC which was over 90 years old in India.
So many factories which were thriving were closed down once demand fell, onslaught of competition and better economic sense to diversify to new age products.
Just glad today we don't have many concepts such as this and there is much better interoperability and fungibility of talent between jobs.

[vikramvicky1984]

Would recommend a book which I found useful in this context.
The thread about bangalore becoming unlivable too is contradictory to this view
Triumph of the city by Edward Glaeser
Review here:
https://www.goodreads.com/book/show/...ph-of-the-city

[varunsangal]

Job loss is possibly one of the worst things that can happen to an earning individual especially to one responsible for running the household. It is a gut wrenching feeling and can tear families apart and suck them into an economic sinkhole. I know and I feel because I have been there.

However, on the other hand is the employers' view, what are the options that GM has?

1. Continue to manufacture the sedans that don't sell?
2. Shift SUV production capacity to this plant and run 2 or more plants at a sub-optimal capacity?
3. Move everyone to the other still functioning plants and not reduce the payroll?
4. Keep doling out pension to the workers and keep costs up?
5. Push/advertise sedan sales and potentially hurt SUV (more profitable) sales.

In either of the scenarios, GM as a company increases its operating costs and eventually start sinking as its no longer efficient.

While this discourse does not help the laid off employee, the reality is that, if not, eventually everyone gets laid off, union demands and humanitarian perspective notwithstanding.

The fate of the factory town itself would ideally depend on how it adapts to the change. Is there any other USP or can it develop a USP? For e.g. develop office spaces and become a startup hub? Or, given the manufactured cars would be around for another 10-15 years, can they become a town of ancillary/spare part suppliers etc?

[superbad]

The key phrase in all the cases - "The greater good".

Company has 10 factories, 3 of them are in red. They are leeching at their profits, which in turn threatens the said company's allocation for other 7 factories. Does the company soldier on nonetheless & risk shutting down ALL 10 factories, or does it shut down those 3, & save the remaining 7?

All about the big picture.

[libranof1987]

No discussion on this topic can be complete without mentioning Detroit: how a jewel of the American manufacturing industry ended up filing for municipal bankruptcy.

Originally Posted by kiku007

When UAW killed the golden goose.

This was highlighted in the book on Ford as well: American Icon and the Fight to save Ford. Alan Mulally talks about the many challenges UAW and the Ford management had to overcome to avoid a Govt. bail-out.

Originally Posted by ninjatalli

I have read several stories of closure of factories and industry specific slowdowns in the US and the largely but locally impacted population. While this is definitely going to be the norm going ahead given the global movements of corporations on more towards profits in the absence of proper regulations, I wonder if the American media pulls up the notch on the sob stories.

I guess their pride gets hurt immensely when they look at how the Detroit Big 3 have been hammered by the Japanese. Add to that a President who'll jump at anything related to "American jobs going overseas", Mexico especially , and make it a public spectacle.