Executive Intelligence Review
This report appears in the May 12, 2006 issue of Executive Intelligence Review.

Use It Or Lose It: Auto Capacity
50% Unused and Going, Going, Gone

by EIR Staff

The large assemblage of critical auto-industry capacity whose near-term closing or sell-off has already been announced, is represented in part by the map and table of 64 auto assembly, production, parts and supply complexes on pages 12-14. It comprises 73 million square feet of industrial capacity, much of it richly supplied with machine tools, and with machines of both high precision and flexibility, and large force and lifting capability. Its shutdown will cost 75,000 skilled industrial jobs directly; and through immediate radiating effects on smaller supply plants and machine-tool shops, 300,000 more. What is about to be shut represents, in automobile-industry terms, the capacity to build 2.5 million or more cars and light trucks a year. But in terms of urgent national economic investment, it represents a unique industrial capability to build the United States "a new national infrastructure" of transportation, power, and so forth.

Interviews with representatives of the engineering and production workforces in the industry make clear, among other things, that this is by no means the full measure of unutilized, "lost" capacity which could be restored. Since about 1985, five jobs have disappeared for every one which remains in a typical auto parts or supply plant; and two jobs have gone for every one that remains in a typical assembly or engine plant. The Lockport, New York Delphi Corporation facility which makes heating and cooling systems—one of the very few not marked for shutdown by Delphi's bankrupt management—serves as an example. Though the complex will apparently remain open, the largest production building at Lockport is completely empty and used only for storage now; two other production buildings operate at 50% and 33% capacity; the machine-tool-making part of the complex has shrunk from 550 to 250 highly skilled employees; and the overall workforce has fallen in 15 years from 11-12,000, to about 3,700 now, and still shrinking.

And among some of those plants about to close this year or next: Delphi in Columbus, Ohio employs 845 of what was once a workforce of 5,000; Vandalia, Ohio Delphi electronics has 650 workers of its 1990 total of 2,400; General Motors' Pittsburgh Metal Center has 600 remaining of a peak of 3,500 workers; the Ypsilanti, Michigan Visteon parts employed 4,000 workers at one time, and now has 700, with 9 of its 12 stamping presses recently unused; and the Adrian, Michigan Delphi plastic injection mold plant, with a legacy of many industrial missions since World War II (see article, p. 24), has 385 workers left of its 1,150 workforce 20 years ago. Among assembly plants, Ford's Hazelwood facility outside St. Louis is typical: It employed 3,000 skilled production workers only 11 years ago; but had shrunk to 1,700 employed when it closed down on March 11.

Thus, take this highly adaptable unutilized auto sector capacity, and employ it in building a critically needed new national infrastructure under a Federal reorganization; and as many as 2 million Americans would be newly employed, or re-employed in industry—in a nation which has lost 2 million industrial jobs in five years.

Fail to do so, and recent reports show that the majority of this unutilized capacity will have been demolished by 2008. Its rich stock of machine tools will be sold for scrap or "wind up in Mexico" and low-wage outsourcing locations in Asia and South America, where auto firms are "parking" increasing amounts of that machine-tool stock in their globalized operations.

Plant Capabilities for the Legislation's Purposes

A survey of some examples of closing, and otherwise underutilized, auto capacity shows that not only can it be employed for Federal, general-welfare purposes of construction of vital economic infrastructure: It has been so employed. Older facilities all over Western New York, Ohio, Michigan, Missouri, and elsewhere famously produced aircraft and many other munitions during World War II, as the result of a national "conversion" process proposed by the United Auto Workers' Walter Reuther already at the end of the 1930s. In 1945 Reuther proposed they be reconverted to railroad building and housing construction, through Federal authorities; though this wasn't implemented, many plants continued to convert to make other products besides automobiles.

Veteran auto workers report that the older auto plants—with their larger spaces, heavy machinery, and rail as well as truck doors, are industrially more adaptable than newer plants often built to produce a single product. It is a striking fact that the automakers, in many cases, have recently poured hundreds of millions in new machinery and equipment investments into these established plants, only to turn around and shut them down under the savage "demands" of globalization. This is true of the Norfolk, Virginia Ford assembly plant, for example, of the Ford and GM plants in Oshawa and St. Catherines, Ontario, and others. These plants are capable and versatile.

Nuclear fuel rods were fabricated and other nuclear-plant parts made—as in LaRouche's proposed legislation—by both the Fenton (St. Louis) Chrysler facility, and the Adrian, Michigan Delphi instrumentation plant in the 1950s. The Adrian plant produced aluminum during World War II and the late 1940s; aircraft parts and brakes for aircraft and army trucks during the Korean War; fabricated nuclear fuel rods and piping in the 1950s for Bridgeport Brass Company; then produced aluminum again in the 1960s, for Harvey Aluminum and for Martin Marietta; and then from 1974 until now, built and operated plastic injection molding presses for Chevrolet and for Delphi.

The necessity to completely rebuild and refurbish the ancient, too-small, and outworn dams of the entire upper Mississippi River system, has been recognized by many in Congress. As LaRouche proposes, the large modern mitre gates for these many scores of obsolete lock-and-dam systems, could be built at the Delphi plants in Buena Vista Township, or at Lockport, New York. The latter has rail doors and a "North High Bay," with 80-foot ceilings, 100-ton cranes, and large presses, where aircraft were built 60 years ago; the former has a huge bay with 2,000-ton presses and drop forges, three stories tall and set three stories into the ground, and two railroad doors. This plant could also build high-speed railroad stock or other heavy infrastructure. There are numerous other such plant layouts being closed or going unused.

The St. Louis area's five major auto assembly plants of GM, Ford, and Chrysler (the Ford plant just having closed to auto production), together with the many surrounding suppliers and machine shops, are served by railroads at a kind of national hub; the city area also features railroad repair yards. They constitute an ideal center for new construction of electric locomotives, rolling stock, and other components of a high-speed rail system for the nation—as LaRouche's outlined legislation intends. The Chrysler plants and one of the Ford plants have had major investment into new tools, robotics, etc. in the past decade. The Chrysler plants built aircraft in the 1940s, then tanks through the Korean War, and finally nuclear fuel assemblies in the 1950s.

The Michaud, Louisiana plants where NASA has built major rocketry were Chrysler plants; the connection to aeronautics is clear in many parts of the auto industry. The Lima, Ohio Chrysler plant, about to shut down with only 200 of its 3,800 workers remaining in 2001, was taken by General Dynamics to produce the Abrams Tank, now having a production workforce of 800.

And ironically, several Michigan auto-parts production plants have long had contracts to produce quality personal and automotive armor for police departments—even as Members of Congress complained bitterly that U.S. soldiers were dying needlessly in Iraq due to inadequate production of armor for Humvees. Why was the Pentagon not instructed to get the Humvee armor built in auto plants, which could have rapidly retooled to mass-produce it?

Specifically, Machine Tools

The tool-and-die centers of the auto sector are its centers of industrial creativity—"new-build" as some are called—where the machines and forms used by the rest of the industry are designed and built. They are already razor-thin lines of skills and capacity, in grave danger of disappearing entirely, outsourced to Asia.

Typical tool-and-die and metal shops are losing 50% or more of their workers. General Motors has five tool-and-die centers: the Mansfield Metal Center in Ohio; the Marion Metal Center in Indiana; Flint Tool and Die, Pontiac Metal Center, and Grand Rapids Metal Center, all in Michigan. Three of the five are being idled. Their employment—which makes possible the work of all 100,000 GM production employees nationwide—is falling this year from about 1,600 to just 1,275 workers now, and likely to 750 tool-and-die workers by July. (A comparable Delphi Corp. "new-build" center at Lockport has fallen from 550 to 250 millwrights, tool designers, die makers, plastic form makers, an so on.) A "corporate standard die" is the basic measuring unit of highly skilled machine-tool work, and GM's machine-tool centers have already dropped from 1,600 to 1,000 corporate standard dies/year of work, a 40% fall-off.

The clear threat now exists, that this creative core of the whole industry will completely disappear in the near term, with tooling completely outsourced to (typically) India, China, and Korea, and to small U.S. machine shops which often have to partner by computer with Indian or Chinese corporate operations. The loss to U.S. national industrial capabilities would be immense, all out of proportion to the numbers of employees involved. This is doubly dangerous because nearly the same degree of loss of machine tooling and product control by outsourcing, is occurring in the U.S. aerospace sector, the other remaining American fount of machine-tool capability, which has shrunk even faster than auto.

In a DVD on auto retooling just released by LaRouche PAC, "Auto and World Economic Recovery," several auto union leaders and local elected officials stress the national security question constantly brought up by auto and aerospace workers. What happens if, in a time of extended war, United States industry has become completely dependent for machine tooling, on Asian nations, and can't design weaponry, or NASA space activity, without purchasing "outsourced" machine design? As one union representative put it: Through globalization, we are actually oppressing China by the massive outsourcing of manufacturing there, exploiting super-low wages. What if tensions over this, lead to real hostilities, and we have at the same time become strategically dependent on China or other Asian nations for our machine-tool capabilities?

Congress can head off just such a potential strategic predicament, as well as serving the nation's general welfare, by intervening as LaRouche proposes.

Engineering and design workforces in the auto industry perform a function related to creation of machine tools, though also heavily involved in "styling." These workforces would play an important role as the mobile inspection/planning force for an industry-wide "retooling," assessing the rapid conversion of appropriate plants to specific infrastructure building. Though not yet in extremis like the teams of tool-and-die workers, they are also shrinking. Ford's workforce, for example, is 11,000 for engineering, design, and analysis. One design team there had 1,500 engineers and designers at its peak in the early 1980s; 7-800 in 1995; and now, 350. Outsourcing, in this case, has gone primarily to India.

State-City Function and Revenue

Local elected officials throughout the auto plant-closings locations of the Upper Midwest and South, are holding meetings, hearings—the case of Lansing on April 29, attending demonstrations—and searching for solutions to the loss of a large portion of their revenue base. The imminent closing of Saginaw, Michigan's remaining two parts plants, for example, lays off the equivalent of 10% of the city's shrinking population, and takes away even more of its tax base. The school system revenues of two Ohio cities, Batavia and Sharonville, are knocked down 30% by the closing of a Batavia plant. Hazelwood, Missouri will probably lose its police force and other services along with its Ford plant, having to turn to the state or county for police protection. In Michigan, Ohio, and Indiana, home real estate valuations are falling statewide, and tax revenue with them.

The desperation solution of huge tax giveaways to auto companies, to try to induce them to maintain operations or start new ones, can't work. The State of Mississippi (see article, p. 60) in 2004 gave up $460 million in tax breaks, free land, and straight subsidies to Nissan, averaging $60-70,000 per job "created" by Nissan with its Canton plant. Now Mississippi is finding, due to Nissan's extreme low wage policy, that at best it will take 20 years of payroll taxes to recover the revenue lost. Note the small city of Fenton, Missouri floating $1 billion (!) in industrial development bonds to implement tax abatements for the Fenton Chrysler plants. And note Missouri proposing to eliminate entirely its state sales tax on cars made in Missouri, forgoing $1,000 per vehicle to try to keep the assembly plants open.

Such local "solutions," like local attempts to find a way of saving an auto plant by "converting" it to fit a niche in the local service economy, are just straws in the wind of the collapse of auto under globalization. A Federal solution as LaRouche puts forward, through the issuance of Federal infrastructure-building credit, can maintain and expand these bases of state and local tax revenue as well.

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