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Thousands Of Connecticut Jobs Ride On Big 3 Survival

JOBS IN JEOPARDY

ERIC GERSHON

December 11, 2008

It would be hard to understate Connecticut's role in U.S. automobile production: Scarcely any companies here make car parts for the imperiled Big Three.

And yet roughly 25,000 jobs in the state, about 1.5 percent of all jobs here, are directly tied to the automotive industry, mainly in retail sales and service. Hundreds of those jobs have already been lost and many of the rest are in jeopardy, regardless of what happens with the $14 billion bailout package for Detroit.

More than half of Connecticut's 300 remaining new-car dealer locations sell products made by General Motors, Chrysler or Ford. And all three automakers plan to shrink the dealer population drastically as they scramble to reinvent themselves.

Already this year, nearly 30 Connecticut dealer locations, from Greenwich to Stafford Springs, have been merged with others or simply shut down, according to the Connecticut Automotive Retailers Association. Dealerships have laid off more than 700 workers, and counting.

One of Connecticut's few car parts manufacturers, DriveSol, which makes steering shafts in Watertown, mainly for sport utility vehicles, has laid off 200 workers in 2008 alone. At any given time, up to 40 percent of the 230 left are on furlough, according to company executives.

"On a weekly basis we're getting news of plants shutting down for another week," said Dave Schramm, Drive Sol's director of finance.

And when Big Three plants are out of commission, they're not ordering steering shafts.

The scale of the potential damage in Connecticut — a defense and aerospace state, not an automotive state — illustrates the auto industry's bedrock role in America's economy.

Compared with the most car-dependent state, Michigan, Connecticut is hardly threatened. In a total collapse of the Big 3, Connecticut's job losses — including direct and indirect jobs such as building maintenance — would total about 31,200, or 2 percent of the state's employment, according to a Dec. 3 estimate by the Economic Policy Institute in Washington, D.C., which supports federal loans for the automakers.

That pales in comparison to the losses Michigan would face — 407,300, or 8.9 percent. Indiana would lose 5 percent, and at least four states in the South and Midwest would lose 4 percent or more, EPI said.

The Connecticut state treasury has been feeling the effects of the auto dealers' struggles all year. Tax revenue from motor vehicle sales, which were $371 million in 2007, the biggest single category of sales tax receipts, were down 7 percent in the first half of 2008. Sales have fallen more sharply since June; tax receipt figures are not yet available.

While direct financial aid for carmakers stands to help the thousands of smaller manufacturers who sell them parts, at least in the short-term, the bailout's effect on dealers, who basically represent the industry in Connecticut, is less direct and harder to gauge.

Still, dealers here say federal aid is life-or-death for them. They view it as the best hope for survival of the Big Three, especially GM and Chrysler, which must endure if consumers are to buy their cars and bankers are to make loans to dealers and consumers.

"The banks are afraid to loan money unless they're sure that the automotive industry is going to be there," said James Fleming, president of Connecticut retailers group, who has traveled to Washington twice in the last week to lobby legislators.

Yet survival of the Detroit companies would hardly promise a reversal of fortune for the dealers. Consumer confidence is tied to individuals' perception of their economic prospects, and 2009 appears likely to bring more heavy job losses — possibly millions of them. Whether the carmakers limp on with the help of government loans or through bankruptcy of some form, they won't be the giants of the past.

"Either way, they're going to continue to reduce the number of cars they make and the economy is going to continue to be in a funk and there's not much we can do about that," said Peter Morici, a University of Maryland economist who has testified before Congress during its consideration of loans for the industry.

However, others point out that loans could buy time for the entire automotive supply chain, keeping many workers employed until the economy starts generating jobs. One way or another, the U.S. automotive industry will shrink — but a sudden collapse in the midst of a deep recession, when few other jobs are available, would have brutal consequences.

"When things are really bad, you don't worry about tomorrow because you may not survive that long," said Fred Carstensen, director of the Connecticut Center for Economic Analysis at the University of Connecticut. "We want an orderly process of shrinkage. You want it to occur in a way that does not exacerbate the current crisis or inflict collateral damage way beyond what would happen in the normal process of restructuring an industry."

A partial roll call of Connecticut dealer locations that have been merged into others or shut down completely would include Pontiac Center of West Hartford; Wagner Ford of Simsbury; Carter Dodge of Manchester; Dillon Ford of Manchester; Frank Buick of Naugatuck; Georgetown Jeep of Wilton; Saturn of Berlin; and Competition & Sports Cars, Ltd of Greenwich.

Many dealers don't advertise closings, said Fleming of the retailers association, which provided the list.

"They don't release a lot of information, because they're often family businesses," he said, "and it's like losing a kid."

It's not only dealers of cars made by the Big Three that are rooting for federal loans.

Gary Reynolds, whose family has operated Reynolds Garage and Marine in Lyme since the horse-and-buggy days, sells Subarus, a Japanese make.

"Nobody's showing up in our showroom either," he said Wednesday.

Reynolds, who employs 25 people, fears the sudden collapse of the Big Three would further depress consumer confidence and devastate U.S.-based parts suppliers that foreign as well as U.S. carmakers depend on.

In his role as an elected director of the National Automobile Association representing Connecticut dealers, Reynolds was in Washington Wednesday with Fleming, trying to persuade the state's lawmakers to support loans for Detroit.

But he knows government loans alone won't save the day, because a car is a big purchase, with or without easy credit.

"People need to have some faith that their job's going to be there next week or next year," he said.