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September 19, 2006

Have you driven an economy lately?: Ford cuts miss Louisville, but we’re not done with the gas-guzzler blues

A deep sigh of relief accompanied last week’s announcement that Ford Motor Co. would spare the Louisville Assembly Plant and Kentucky Truck Plant from the latest flourish of the blade, both from city leaders and the families of the 8,719 people who work at the two Louisville plants. The facilities are safe for at least a couple years, and Mayor Abramson, Gov. Fletcher, the state legislature and others say they will continue trying to entice Ford to commit to the two plants further down the line with everything from tax incentives to worker-training programs. The 8,100 or so hourly workers in Louisville can choose from eight different buyout packages, something Ford is making available to its entire American manufacturing work force; a similar move by General Motors this year netted the company a one-third reduction in employees.Ford’s job cuts are just one more example of the 30-year stagnancy in American manufacturing jobs. As automation has overtaken everything from automotive to steel production, workers have lost jobs to machines; meanwhile, companies like Ford have been crippled by the cost of pensions and health care for retirees supported by a significantly smaller work force.In Jefferson County, some 30,000 manufacturing jobs disappeared between 1970 and 2000, according to the Bureau of Economic Analysis. Meanwhile, retail jobs have nearly doubled and professional services (the so-called knowledge-based economy of technology-based jobs and the like) nearly tripled between 1970 and 2000. But from 2001-04, Louisville lost almost 10,000 manufacturing jobs (the way the BEA considers data changed slightly between 2000 and 2001, so the numbers don’t compare naturally). Over the same period, professional services jobs stayed about the same, with the exception of a large gain in health care. As economists have been saying for a long time, America’s knowledge-based economy is outpacing its blue-collar one. It’s great news that Louisville will keep the Ford plants, but that’s no economic savior. The job cuts are part of Ford’s revised “Way Forward” plan, the curiously named restructuring program the company hopes will deliver it from the $1.44 billion loss it suffered in the first half of this year, characterized most markedly by its dismal truck and SUV sales. Nine North American plants will close by 2008, dropping Ford’s manufacturing capacity on this continent by over a quarter. Roughly 14,000 salaried jobs will be gone.Ford has a few reasons to keep the Louisville plants open, according to U of L economist Paul Coomes: The city is blessed with near-perfect geography for automotive manufacturing, much of which occurs between I-65 and I-75, and Explorers assembled at the Louisville Assembly Plant are heavy and costly to ship, so the centralized location is key. Also, the state has among the lowest electricity rates in the country, and the plants guzzle electricity like an F-350 slurps diesel.So what are city and state leaders doing to keep Ford here? They can’t say exactly before formal offers are made. But with Ford considering the next five years, it seems the decision to close the plants rests on whether Ford decides to upgrade them. Both lack flexible production platforms, and the Louisville Assembly Plant is currently capable of building only the Explorer and the similar Mercury Mountaineer.“Our focus is to attract Ford Motor Co. to invest in these plants,” Mayor Abramson said in an interview Monday. “So what that means is we would like to see investment in things such as the flex platform, which would give them the capability to make different vehicles on the same line.”But what’s happening at Ford is a microcosm of a long, sloping trend in American manufacturing. “While they haven’t eliminated all those jobs, a lot of them are early buyouts, and they’re not replacing them at the same pace, so the work force is graying, is the term,” said Art Wheaton, an industry education specialist at Cornell University’s School of Industrial and Labor Relations. “You’re not hiring a lot of new people, so the work force starts to get older, and both GM and Ford ran into what they call legacy cost issues.”Add to that Ford’s notoriously inflexible adaptation to market trends toward smaller, more fuel-efficient cars (roughly two-thirds of its sales are trucks and SUVs), Wheaton said, and the problem becomes self-evident.What Ford’s woes mean for Louisville raises the broader question: What does it mean for the middle class?“If I’m an employer and I can get rid of my older workers and buy them out, is it in my best interest to bring in younger workers with less pay and less benefits?” said Ron Crouch, director of the Kentucky State Data Center at U of L. Crouch is concerned that the obvious answer to his question — Yes — will have a multiplier effect on the economy, and lead to a continued slimming of America’s middle class.For Louisville, it’s a matter of nurturing and attracting more knowledge-based jobs — everything from offering economic incentives to improving Kentucky’s low-end education levels — while hanging onto the well-paying manufacturing jobs at places like Ford and General Electric. “While we continue to work to retain the good-paying manufacturing jobs, we at the same time are focused heavily on knowledge-based jobs — biotech, life science, using the research from the medical school at the university, looking at the tech companies that are developing and growing, financial companies that are developing and growing, those kinds of institutions,” Abramson said. Contact the writer at sgeorge@leoweekly.com