By the numbers
•Personal property tax payments by GM in Grant County:
2007: $2,968,175.68
•Real-estate property tax payments by GM in Grant County:
2007: $869,462.78
2006: $867,329.42
2005: $911,594.18
2004: $1,194,485.38
2003: $1,091,266.42
As federal legislators consider Big Three automaker requests for financial assistance and stock prices fall, people with knowledge of the industry across the country and in Grant County wonder what's in store for the future of General Motors, Ford and Chrysler.
Popular opinion suggests that if the automakers do receive a bailout that government oversight will need to be better than it was for the $700 billion banking industry program enacted Oct. 3.
David Raabe, vice president of NatCity Investments in Marion and a longtime Grant County financial consultant, thinks any aid for the auto industry needs to be monitored closely by the federal government.
He has recently seen firsthand how a bailout program can grow beyond Congress' initial intention - the financial bailout, sold to Congress as the buying of troubled assets in a beleaguered industry.
Pittsburgh-based PNC Bank became one of the first companies to draw upon those bailout funds when in October it used the money to acquire Cleveland-based National City Corp.
The entire corporate structure of Raabe's business will eventually be altered, though he doesn't expect to see any changes at his five-person office before 2010.
Personally, he thinks an auto industry bailout is necessary but needs to be watched closely.
"I just don't think there's an option to not bail them out," he said. "Government just needs to monitor the bailout. In the last (bailout), money intended for loans is now going to buy banks. That's the disconcertion with people. People are not being held accountable.
"It's a pretty complex issue, and clearly there's no simple answer," Raabe said.
The top three U.S. automakers now face the toughest challenge in their 100-year history. General Motors announced earlier this month that it could be out of cash by the end of the year if it doesn't receive some type of assistance.
The Michigan-based Center for Automotive Research said in a study earlier this month that though the Big Three employ roughly 239,000 people in the United States at the end of 2007 that the total failure of those three companies would cost the U.S. economy about 7 million jobs in the next three year.
Ties to Detroit run deep in Grant County. General Motors estimated in September that 1,200 people are employed at its Marion stamping plant, and a Chrysler spokesman estimated in April that about 200 employees of its Kokomo plant live in Grant County.
Though impossible to say how many county families have direct ties to the automakers, the tax impact of GM here is clear.
Ed Merchant, local president of Regions Bank and president of the Grant County Economic Growth Council, estimates based on employment numbers and average salary that GM annually pays about $75 million in wages to workers at the Marion plant.
County Treasurer Roger Bainbridge estimated about 1/15th of the county's tax base comes from the stamping plant at Second Street and Miller Avenue and its other county properties.
For tax year 2007, records show GM paid $2.97 million in personal property taxes and $870,000 in real estate property taxes. That money does not include the company's income tax contributions.
"In actuality, their fixtures, furniture and equipment, from a tax standpoint, is more than the real estate," Bainbridge said. "It's a bit unusual, but for a manufacturing company which that much machinery, probably not."
In a worst-case scenario where General Motors no longer paid Grant County taxes, Bainbridge said it would fall on other taxpayers to make up the difference, which he said would likely result in roughly a 6 percent to 7 percent tax increase across the board.
GM and the other automakers might also seek additional incentives to stay put in some of the communities where they already operate.
Phil Powell, an associate professor of business economics at Indiana University's Kelley School of Business, said a General Motors that starts cutting plants would be able to get cities to essentially start bidding against each other to keep their local facility open.
He's predicting a tough year for communities like Marion who rely heavily on manufacturing.
"There's a financial crisis, and on top of it, the foundations of our economy are out of whack," Powell said. "We have to solve the financial crisis before we can even begin to deal with the recession. We're just at the front edge of all this now."
In the meantime, manufacturing-heavy communities should expect to see unemployment rates grow by at least 2 percent, Powell predicted.
"The news is grim," he said. "Hoosiers are paying the price for bad management in Detroit. There has to tectonic shifts in those organizations. Otherwise, GM's bad management will continue to hold Marion hostage."
He thinks a government bailout is a waste of taxpayer money but can still help the Midwest avoid financial armageddon.
"But government needs to be very innovative and pioneering in the way the restructuring is ordered," he said.
The spending multiplier resulting from business by the Big Three and its suppliers in East Central Indiana is sizeable, Roy Budd of Energize-East Central Indiana said. The loss of those businesses will undoubtedly cause tough times throughout the region.
He said secondary industries like retail and health care also stand to take a hit if manufacturing falters.
"We're going to see more of a rippling effect take place," Budd said about the cutbacks in U.S. auto manufacturing.
Despite the potential downside, Budd said he opposes a government bailout of those industries, even conceding that in the short term no bailout would be devastating for the economy. Detroit builds a good product but will struggle to compete while overcoming massive legacy costs, he said.
"We call ourselves a capitalist society," Budd said. "At what point are we going to draw the line between capitalism and socialism?"
Whatever the bailout decision, Budd predicts that 2009 will be a tough year for the region and the turnabout is likely still a ways off.
"It's not going to happen overnight," he said.
Merchant disagrees. He said a bailout with strings attached does not amount to socialism.
"Every modern democracy has some sort of social agenda," he said. "Giving your neighbor a helping hand is more Biblical than socialist."
GM retirees, including those in the United Autoworkers, need to pay particular mind to the government's Personal Benefit Guaranty Corp., said Jon Clark of Financial Enhancement Group in Marion.
He said, if they haven't yet, now is the time for auto-industry workers to re-evaluate their retirement plan and make sure they're not too heavily dependent on the pension in case GM needs to file for bankruptcy protection.
Should the company undergo massive restructuring, Clark said, the benefit corporation will bail out the pensions but not at 100 percent of value. He cited the recent example of Delta Airlines, where pensions were saved at about 65 percent.
"If it weren't for the pensions, I don't think they would or should bail (the Big Three) out," he said.
Tim Eckerle, director of the growth council, called this the single biggest challenge the country has faced in his lifetime.
"No one I've seen out there is talking about how this (government and industry) partnering is going to work," he said. "This goes beyond our plant and its suppliers. It'd be devastating to our whole economy."
No one in Grant County will likely be able to determine if or for how long General Motors remains the county's largest full-time employer, but Merchant said the Marion facility has an advantage over other GM stamping plants.
"As far as plant closures, Marion has a leg up because it's been profitable and had a relatively good relationship with its labor force," he said.
Eckerle said the Marion plant has produced several company stars for GM over the years, including Joseph Spielman, who founded the growth council here before becoming GM's vice president of manufacturing.
Marion Mayor Wayne Seybold said he thinks the city's facility as is secure as any GM plant can be and that the city will continue to ensure that it is.
"I have to believe it's pretty stable based on the facts that I know," Seybold said. "As a city, we have to do what we can to make it strong. We have to keep taxes in check and help do what we can for them."
Seybold said the federal government needs to approach the problem with more than just dollars.
Some of his suggestions include government pledges to purchase more vehicles from the Big Three or tax write-offs for people buying Detroit-produced cars.
"In times of hard trouble, we've done things that have put people to work," Seybold said. "Instead of throwing money at the problem, why don't we throw work at work?"
One long-term bright spot is the ability of other firms to recognize a pool of skilled labor and capitalize on it, Powell said.
"A work force like that in Marion can definitely be attractive to other firms," he said. "But that can only occur when recovery begins."
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