Archive for May, 2010

RECONDITIONED AUTO COMMUNITIES “ON A CLEAR DAY YOU CAN SEE GENERAL MOTORS AGAIN” *

May 4, 2010

Like replacing a broken “starter” on your car when it won’t start with a reconditioned one, many Midwest auto based communities are now getting a reconditioned “economic starter” – auto manufacturing and supplier jobs breathing life back into the worn-out auto based economy.

It’s a “no-brainer”. The Wall Street Journal reports (May 30, 2007) auto jobs rebound in the same smaller communities once abandoned.  Where else can you find a large concentration of worker skill sets needed for these jobs – they’re same skill sets idled a few years back!

But will the reconditioned auto jobs assure a sustainable future community economic vitality?

I’m a car guy.  I still have a mid-1960’s Chevy “pig-tail” in my big red Sears tool box – that important connection that brought electricity to distribute the spark that made the engine run.

I’m also a product of an Urban and Regional Planning education program where we studied economic development – the post World War II growth of American manufacturing might, especially automobile and supplier factory expansion to suburban and small communities throughout the Midwest.

The terms globalization and “off-shoring” didn’t exist in spoken language then.   Foreign car sales were just an amusing anecdote to monthly news reports on new car sales.

We studied regional economic development; safe trusting the knowledge the Detroit “Big Three” auto makers would continue growing providing employment opportunities for the masses. 

Economic developers could always count on the job growth in the existing “Big Three” factories and assembly plants plus location and construction of several new facilities each year.

The practice of economic development was simple – grow the employment of existing firms and recruit the next plant expansion.

Today the practice of economic development is different…”very different”.

At the Cross Roads, Middle America and Battle to Save the Car Industry tells the story of the importance of this change.

Welcome to “auto towns” places like Kokomo, Anderson and Marion in Indiana, the focus of this book but also Flora, Illinois profiled in the WSJ May 30, 2010 article as an auto reconditioned come-back community.

 http://online.wsj.com/services/article/SB10001424052748704302304575214400843620576-search.html?KEYWORDS=after+the+crash&COLLECTION=wsjie/6month

Each has a story to tell – a story of dependence on auto manufacturing and supplier jobs for economic sustainability.  But back a few years, each community recognized that “economic diversification” was necessary.  Local community economic development organizations were formed with the goal of economic diversification – less reliance on a single dominate employer.

At the Cross Roads tells the story of central Indiana, communities – their dependence on the auto for its economic life blood, the known need for diversification, the impact of globalization of manufacturing jobs, the impact of foreign auto dominance, and loss of jobs during the global recession of 2008/9.

These central Indiana towns, like many others whose history is intermingled with a single major employer, portray an economic development style, many times a philosophy of grandeur that “everything will be all right – we’re not like other communities who don’t have a major employer’.

At the Crossroads, a book that every economic development volunteer or practitioner should read, chronicles the history of these “auto towns” providing a critical look at the role of economic development – local government sponsored actions to retain and grow local employment.

Their history identifies, in the face of needed “economic diversification” known to all, the burden to attract new employers while retaining and expanding local-based multi-national corporations was more than the local government economic development programs could shoulder.  The authors describe the varied and often time conflicting roll of the multinational auto companies and suppliers, organized labor, local government and their officials, and state economic development programs in light of global competition and intense state to state competition for new jobs and investments.

For small community economic developers, a story line titled “create an incentive or die” comes to life.  The real question is asked – In face of intense competition for jobs and investment that will fund government services, can smaller communities remain competitive without tax abatements and credits?

The first reader conclusion drawn will be that without incentives both for new business attraction and retention of existing businesses, many smaller communities will face financial ruin, a prediction offered by Richard C. Longworth in Caught in the Middle – America’s Heartland in the Face of Globalism. (See blog post Why We Have Ghost Towns in the Midwest at https://chuckeckenstahler.wordpress.com/2010/04/03/urban-tallent-poaching-%e2%80%93-a-small-town-rural-way-of-life-comes-to-an-end-or-the-making-of-rural-ghost-towns/

The second reader conclusion drawn will challenge the notion that all former “auto towns” will be repopulated with Richard Florida’s “creative class”. With projections of sizable excess auto plant capacity well into the future, only those “auto towns” with schools, crime rates, cost of living, taxation and transportation access advantages will be attractive to the young  highly educated young people – families needed to renew the neighborhood community social structure necessary for economic sustainability (See blog post Michigan Auto Job Loss Now Excess 50%  at https://chuckeckenstahler.wordpress.com/2009/12/10/michigan-automotive-job-loss-now-exceeds-50/). 

Kokomo Mayor Goodnight subscribes to this notion that “some cities will be winners in the days and years ahead, and some will be losers.”

The last conclusion drawn by the reader will be that some form of organized regional economic development program is required to carry some of the burden now born by local communities to remedy a Midwest landscape “potted with hollowing out city centers, empting manufacturing towns and isolated farming and timber communities which continue to bleed educated workers”, a Midwest characterization offered by John Austin of the Brookings Institute.

So how do we create the spark that continues to ignite the economic development engine?

 It’s a good question – What’s the role of the economic profession in changing a fiercely ingrained history of “local rule” economic development?

First – economic development must change – the old historic practice of recruiting new business expansion – especially old economy businesses is over.  While new business recruitment will always be a component, it may lessen in importance in the future.

Second – the 20-year research documenting that new young business creates post recession jobs indicates that new business formation should become a larger part of organized economic development programs.

Third – communities must supply certain physical resources, not planned – but in place, and easily obtainable – sites and buildings supported not only by traditional water, sewer and transportation infrastructure but large capacity high-speed communication infrastructure.

Fourth – federal and state economic architecture must be reshaped to ease new business formation maximizing the chance for early profit for newly formed businesses.

Lastly – Economic development services – the economic development functions of government and partner organizations must have better coodination and functionality aiding new business formation.

Like my old “60’s pig tail” whose job it was to deliver electricity to spark the start of the engine and then keep it running smoothly, economic developers are challenged to “spark” change in today’s local economic development delivery system then keep it running smoothly so that on a “clear day” we not only see General Motors but other significant employers.

 * Thanks to J. Patrick Wright author of a 1979 book of the same title about John Z. DeLorean’s “Look Inside the Auto Giant”.