Auto Industry’s Return is Midwest’s Revival

Posted on June 13, 2011

“A country that doesn’t build things is in trouble.” – David Cole, chairman, Center for Automotive Research.

The US automotive industry is back.

For the past few years, the automotive belt states of Michigan, Ohio and Indiana have struggled through the industry’s woes, with closed plants, bankrupt companies and hundreds of thousands of lost jobs.

This region, which grew with cars, made its bed with cars.

The bed didn’t just get lumpy – it collapsed and was on fire. Reports estimated that more than 100,000 jobs in the auto industry were being lost each month in 2008, and without the bailout that followed, more than one million jobs were next as the companies hemorrhaged due to low consumer spending and a complete lack of financing.

Today, two years after the $80 billion bailout of the industry, the Big Three is doing better than ever. In the first quarter, the industry reached an important milestone when all three posted positive quarterly net profits – for the first time since 2004. GM’s first quarter profit was nearly triple its profit from the same quarter just a year prior; Ford’s first quarter 2011 net income marked its best first-quarter performance since 1998 and the company’s eighth straight quarterly profit. Chrysler realized its first quarter of positive net income since exiting bankruptcy.

Pertaining to the CRE industry, both GM and Chrysler have announced investments totaling more than $8 billion in their US facilities, including $1.1 billion at its Kokomo, IN transmission plant. GM said last week it will invest an additional $2 billion in US factories in eight states, including a $130 million new data center at its Tech Center in Warren, MI.

Suppliers have also recovered. Bankruptcies dropped from 59 in 2009 to just a handful in 2010, according to a White House report released June 1. Companies such as Punch Tech, a sheet metal machine company in Marysville, MI is running overtime shifts.

The debate rages about whether the $80 billion in auto bailouts were worth it – it’s projected that the government won’t recover almost 20% of the , and Republicans recently criticized Pres. Obama’s celebration of bailout victory as unnecessary.

As automotive jobs return to Michigan, Indiana and Ohio, consumer spending, housing price improvement and even commercial real estate deals should follow – a recovery that most in the Midwest believe was worth every penny.

By Robert Carr, Globe St.