Kokomo — The national media called Kokomo a “town saved by the stimulus” this week, and Kokomo Mayor Greg Goodnight says the tag isn’t too far from the truth.
Goodnight appeared on Alan Colmes’ FOX News Radio show Friday evening, discussing the effect of the stimulus and the auto bailouts on the City of Firsts, an interview prompted by a CNN Money series on Kokomo’s economy.
“I think the effect of the stimulus has been positive, not just in Kokomo, but throughout the country,” Goodnight said Friday, citing funds obtained by the city to start a bus service, rehabilitate homes, improve city streets and keep 18 police and firefighters on the city payroll.
“Look at the [$89.3 million] Department of Energy grant to Delphi Electronics & Safety. That in itself is a success story,” he added.
Thanks to that grant, which Delphi is matching, the company has begun a design and manufacturing startup venture on the city’s north side, which is expected to eventually employ 190 people.
Goodnight said he knows many Kokomo residents are highly critical of the stimulus and the auto bailouts, including two business owners featured in the CNN stories. Ironically, both business owners received city loans to help them get started.
“It’s because they never had to live through the situation of the car companies going through liquidation,” Goodnight said. “They never saw the consequences.”
The City of Firsts has lost a quarter of its work force — some 12,000 workers — since the high-water mark of 2000.
But employment and wages have stabilized over the past year after plummeting in 2008.
That year, with Chrysler’s four Kokomo plants closed while the federal government deliberated reorganization plans, the unemployment rate hit 20 percent in Kokomo.
The preliminary unemployment rate in Kokomo for September was 12.7 percent, according to the U.S. Bureau of Labor Statistics. Last September, the unemployment rate in Kokomo was 13.8 percent.
Kokomo is being looked at as a case study mainly because the local economy is more dependent on auto manufacturing than any other city in the nation.
“Kokomo has a far higher percentage of auto manufacturing jobs than any other metro area,” Howard Wial, economist and fellow with the Washington, D.C.-based Brookings Institution, said in a December 2008 interview.
Brookings researchers concluded Kokomo would be hit harder by a Big Three failure than any other U.S. metro area.
“In Kokomo, about 22 percent of all jobs are in autos and auto parts,” said Wial’s report, “How a Metro Nation Would Feel the Loss of the Detroit Three Automakers.”
“A loss of those jobs could mean a loss of well over half the employment in the area.”
Even with Chrysler recalling about 400 laid-off workers, Kokomo is still feeling the lingering effects of the Chrysler, GM and Delphi bankruptcies.
In particular, Delphi’s salaried retirees saw their pensions drastically reduced
In July, to exit bankruptcy, the auto supplier terminated its 70,000 salaried and hourly retirees’ pension plans and gave them to the federal government’s Pension Benefit Guaranty Corp.
That action put an estimated $6.7 billion burden on the taxpayer-supported PBGC, the second-largest amount in its history.
For workers still at the plants, many are seeing the effects of a new wage scale, designed to make the American automakers more competitive with the foreign transplants. Wages for many workers went from $27 an hour to $15.50 an hour.
But this year Chrysler announced it will invest $300 million in a new transmission line at the Indiana Transmission Plant, one of the four plants Chrysler operates in Kokomo.
“Certainly we know the reality is that we were almost dead. We were on a pathway that was quite a bit different, and probably wasn’t so favorable to Kokomo,” Chrysler vice president Brian Harlow, head of powertrain manufacturing, said. “That has just dramatically changed.”