The 'What is Wrong With Michigan' Thread

[GaryP]

Here's our new thread. Should we cut and paste the stuff from the Icon thread?

I dont understand how anyone can think corporations could cause the terrible economic conditions in the state. Could one of the guys from this camp explain their thought process?

[snoogit]

For all intents and purposes this should really go in the forum above this one. Since it is a stae-wide issue, but I should respond anyway.

Corporation never have good images when it comes to worker's rights. its just ingrained in the history of every corporation that has ever existed. But many people who blame the corporations are also Kenyesian Economists, who believe in balance over powers. Many corporations don't seek balance, but try to tip the odds in their favor. That is just human nature.

It is equal parts of the corporation being too greedy for short term gain. and part of the government for not fostering better educated individuals to fill the jobs that are now headed overseas. And its not just manufacturing, its skilled labor too. A lot of skilled labor is headed to India, where the country has a huge emphasis on education (so long as your in the right caste, but with 1 billion people theres enough in even the highest classes to fill skilled jobs.)

The biggest reason why the decline in Michigan with automobile manufactring is because Detroit relied too much on the SUV to get short term profit. once the Gas prices skyrocketed towards $3 a gallon, SUVs lost their favor amoung those purchasing vehicles. Now Detroit has to rebound from the abrupt change in consumer habits. Since the Japanese companies didnt over-emphasize the SUV like Detroit did, they are doing much beter right now. This is part of the reason why it seems the south is doing so much better fror manufacturing,The south is home to many more international car factories then Michigan is, which paints the illusion that unions are the only thing to blame for the decline in jobs.

If I were to put a big stamp on the reason Michigan is struggling, it can be tied directly to the SUV. Detroit's almost complete reliance on the SUV, and Truck took a big hit. Today the Camry not only outsells all sedans, but all vehicles period. Long the top of the automobile chain was the Ford F-150 which has dropped with the higher gas prices.

THe real problems stem from both sides. The government clinging onto a dying industry, and that same industry relying on quick profits to survive. Will it turn around? I hope so. Michigan needs to find a new identity, thats for certain, but neither the government, nor the big corporations can do that.

[GaryP]

I would have put it there, but those threads tend to get ignored. I dont mean to exclude the people from the other michigan forums.

[GaryP]

Snoogit, I think Michigan

[RiversideGator]

The problem with development in Michigan is that it is a high tax and high cost of doing business state. In fact, Michigan is the 5th most expensive state in the country to do business in. Add to that the fact that it is very cold and you have the recipe for economic stagnation. The solution is not to make matters worse by attacking the business which creates jobs in the first place, but instead the way forward is to lower taxes and regulations and bust up the unions by making Michigan a right to work state. The reality is in the US business can move from state to state and, if you are not competitive and have cold weather, you will have problems. For more info on the high cost of doing business in Michigan, see http://www.ppinys.org/reports/jtf2004/relativecost.htm

[torgo]

For all intents and purposes this should really go in the forum above this one. Since it is a stae-wide issue, but I should respond anyway.

Corporation never have good images when it comes to worker's rights. its just ingrained in the history of every corporation that has ever existed. But many people who blame the corporations are also Kenyesian Economists, who believe in balance over powers. Many corporations don't seek balance, but try to tip the odds in their favor. That is just human nature.

It is equal parts of the corporation being too greedy for short term gain. and part of the government for not fostering better educated individuals to fill the jobs that are now headed overseas. And its not just manufacturing, its skilled labor too. A lot of skilled labor is headed to India, where the country has a huge emphasis on education (so long as your in the right caste, but with 1 billion people theres enough in even the highest classes to fill skilled jobs.)

The biggest reason why the decline in Michigan with automobile manufactring is because Detroit relied too much on the SUV to get short term profit. once the Gas prices skyrocketed towards $3 a gallon, SUVs lost their favor amoung those purchasing vehicles. Now Detroit has to rebound from the abrupt change in consumer habits. Since the Japanese companies didnt over-emphasize the SUV like Detroit did, they are doing much beter right now. This is part of the reason why it seems the south is doing so much better fror manufacturing,The south is home to many more international car factories then Michigan is, which paints the illusion that unions are the only thing to blame for the decline in jobs.

If I were to put a big stamp on the reason Michigan is struggling, it can be tied directly to the SUV. Detroit's almost complete reliance on the SUV, and Truck took a big hit. Today the Camry not only outsells all sedans, but all vehicles period. Long the top of the automobile chain was the Ford F-150 which has dropped with the higher gas prices.

THe real problems stem from both sides. The government clinging onto a dying industry, and that same industry relying on quick profits to survive. Will it turn around? I hope so. Michigan needs to find a new identity, thats for certain, but neither the government, nor the big corporations can do that.

I don't think its a matter of education, but simple economics. What business would spend $50 an hour on someone when you can get someone in india or mexico to do it for $10 an hour? Are unions to blame for this? Partially, yes, but not entirely.

Businesses will follow the path of least financial resistance. If they can make a higher profit here, then they will move here. Labor unions have to cooperate instead of demanding all kinds of ridiculous benefits, pensions and other hand-outs. And they have to work to improve their image. Unions were founded to keep the working man from getting screwed, not to keep the working man from working. I'm sorry, but a high-school dropout shouldn't make $30 an hour turning a screwdriver or operating some machine.

My understanding for why Michigan is in the tank economically because we have an "unfriendly" tax environment. Its not Granholm's job to "create jobs", but she should be trying to create an environment in which businesses can thrive, and it doesn't seem like she has done that. Engler didn't do it, either. I think MI has depended on auto-based manufacturing for far too long. I agree with the part about making SUVs for short-term gain, but then again, they made SUVs because they were selling like hotcakes. Foreign auto makers like Toyota and Honda have the reputation for making high-quality, dependable cars. The "big three" have a reputation for making crappy cars and cutting corners so they can make a higher profit margin. I am in the process of getting a new car, and guess what? Its not a GM, ford or chrysler.

And thats my $0.02

[GRDadof3]

I think Riverside Gator is correct in some aspects. Cold weather affects older people especially (achy joints, slip-n-falls on the ice, tougher to drive in, etc.). Because of the enormous size of the Baby Boom generation reaching that age, they are now moving to the South and Southwest in droves. As they have done that, cities in the South have built giant new freeways, gleaming office buildings, giant new malls, gigantic "Sun City" communities, and the spinoff service industry that follows. This creates an exciting environment which impresses company execs looking to set up new locations. When was the last time you visited any city in the Midwest or Northeast and could sense "excitement".

The added revenue that the receiving States get helps them maneuver a bit more to attract more businesses. It's a domino effect. If you are between 25 - 35 years old right now, that trend will exist throughout your lifetime. But like every period of time in this country (and the world), it will eventually be no longer desirable to live in the South (strife, politics, weather, dwindling natural resource, etc.) and the population will shift again.

However, with that being said, Michigan has weathered the current economy much better than it has in the past, but as lighthousedave mentioned, it is going to be tough. Growth requires a certain amount of optimism, but coupled with tough automotive sales is the LOOMING crisis regarding pensions and health coverage for the thousands of current automotive employees and retirees. Managing the pension fund at GM has now outgrown the vehicle business side for the first time ever. Even Big 3 retirees in Michigan may be fearful of what lies ahead regarding retirement, which actually will affect every area of the country.

Dang! Someone at work interrupted my train of thought. I don't know what the answer is.

Edit: All the more reason to drastically lower the costs of doing business in Michigan, and invest in "quality of life" amenities: schools, parks, natural resources. How you do both is the tricky part.

[allbusiness]

<snip>...coupled with tough automotive sales is the LOOMING crisis regarding pensions and health coverage for the thousands of current automotive employees and retirees. Managing the pension fund at GM has now outgrown the vehicle business side for the first time ever. Even Big 3 retirees in Michigan may be fearful of what lies ahead regarding retirement, which actually will affect every area of the country.

No longer looming, but already here. And not just automotive! This very issue is killing public schools as we know them (or at the very least severely challenging their budgets). It's crippling city, township and county governments, hospitals, colleges, universities and other large institutions, and bringing large industry to its knees.

Delphi is just the latest -- and largest -- automotive example but it won't be the last. City governments and school districts right here in Kent and Ottawa county are facing huge deficits now and within the next ten years as employees retire and outlive the actuarial charts while current workers demand FREE health care and huge lifetime pensions of their own. Organizations who decided to face this crisis a few years ago and move away from defined benefit retirement programs toward more defined contribution programs (401k, etc.) MAY survive. Others may not.

The "cradle to grave" mentality of many employees (especially union but also those at Steelcase and other local powerhouses) over the past 40 years has come to the point that the retirees and employees , through their own pensions, retirement plans and health care costs, are killing the golden goose.

This has got to change. It's no wonder corporations are moving their manufacturing to countries which do not have unions, health care or pensions. It's not "right" but it beats going out of business when your competition doesn't have to pay those kinds of wages or costs.

[snoogit]

Do you believe that 2 companies can really take the entire state down as much as it is down right now? I know that these are 2 of the 4 biggest companies in the country, but what about all the other companies in Michigan? It seems as though all of our companies in almost every sector are doing poorly (with a few exceptions).

EDIT:

Sorry that chart sucks. Try this one. Its a little better.

Yes. Id say a large portion of the other companies depends on the 2 big companies to survive. Look at some of the other companies facing problems, they are parts manufacturers. to have a big company, you needs lots of small companies working for you. When the big companies begin to hurt, theres a domino effect along the chain of supply. When Detroit was loosing sales on SUVs, fewer SUV parts were needed, so not only is Detroit having to cut jobs, so is Holland, Grand Rapids, Flint, Etc. Anywhere there were supply factories. Stamping copanies dont have to make as many stamped parts, so they loose money. Plastics companies dont have to make as many parts, etc etc etc.

Another hit was when the demand for furniture went down, that seemed to happen right around the same time SUV sales began slipping. SO we kind of had a double whammy hit is uere in Grand Rapids, and As far as I know, Steelcase and Herman Miller arent union factories. (I could be wrong)

[MJLO]

my take is, that what's wrong with Michigan is finally starting to be addressed, and corrected. The bankrupting of Delphi, may be one of the better things to happen to this state. If bankruptcy means they can organized themselves out of some of there high Labor costs and legacy costs. then maybe the American auto Industry can get back on it's feet again, and become profitable. While those Jobs are leaving Michigan, those companies have no intention of moving themselves. If the auto industry can turn itself around and compete, Maybe they can expand again! Pumping money back into the state, and the economy, instead of creating a vacuum. Who knows, maybe in a couple years Union wages will have made the adjustment, to a more comparable, level. If companies can again afford to pay blue collar workers in this state, you may actually see more jobs return! Either way, diversification in this economy has started, Look around Grand Rapids, things are changing drastically, Things are turning around. Maybe I just have rose colored glasses, but I see good things for our future. I don't think we can go much lower.

[monsoon]

If any of you get a tape or tivo or DVR Lou Dobbs at 4am ESD on CNN there is a segment on the idiot CEO that is running Delphi. Basically he says that workers (USA workers) are over paid, lazy and need to have their pay and benefits cut. Yet at the same time he believes that management ought to be paid more.

It is business attitudes such as this, along with the Bush administration signing bills that reward CEOs such as the head of Delphi for their plans to shift work to China that has hurt Michigan. And for that matter the rest of the USA.

[GaryP]

That idiot had a large write up on today's WSJ opinion page. The article points out his success taking Chrysler out of bankruptcy. It also mentions his role as CEO in turning around Waste Management, Federal Mogul, and Bethlehem steel. He also offers to cut his $1.5M salary in exchange for union concessions.

[GRDadof3]

Uhhhhh, I think that is a stretch to say that Bush is to blame for Michigan's problems. I truly believe it wouldn't matter who were in office right now, the problems we are having have been a long time coming, as others have mentioned.

I do have to say that the cuts that Steelcase has done over the past five years, as painful as they were, has helped them become more stable and profitable, and probably saved them from shutting for good.

[RiversideGator]

For those unfamiliar with the capitalist system, corporations exist to make money for the owners of the corporation, i.e. the shareholders. They are not designed to make work for as many people as possible or to take the place of self-reliance and planning for retirement. Companies will inevitably go under through competition when they neglect the bottom line by paying inefficient workers too much or by guaranteeing workers too many benefits (such as generous pension plans).

[snoogit]

I think one of the biggest problems with not just Michigan, but the nation as a whole is we rely too much on companies to finance our retirement. I think a good balance of Government Social Security, and individual investment should help with that.

Pensions in my opion should be eliminated entirely. that way you dont have to rely on the corporation to finance your retirement, and potentially loose it on a whim.

Two things are constant: Government, and money. Corporations come and go every few generations, but Governments will last millenia if run properly.

[MJLO]

When it comes to retirement, i think the only people we can rely on is ourselves! Don't count on social security, dont count on you're company, the only surefire way to make sure you are taken care of when you retire, is to plan for it yourself.

[monsoon]

For those unfamiliar with the capitalist system, corporations exist to make money for the owners of the corporation, i.e. the shareholders. They are not designed to make work for as many people as possible or to take the place of self-reliance and planning for retirement. Companies will inevitably go under through competition when they neglect the bottom line by paying inefficient workers too much or by guaranteeing workers too many benefits (such as generous pension plans).

Indeed. Henry Ford pioneered the idea that a strong middle class would make his company very profitable in the long run, so he paid them a very good salary. This idea started in Michigan. Now we have the CEO of Delphi, who thinks it is a good idea to get rid of the fat lazy inefficient American worker and replace them with workers in China who get paid $1/day if that. The rich get very rich and the middle class disappears and has to move to Fla to push around boxes in the local Walmart there. Sounds like a plan to me.

I could be wrong but about this but we wouldn't have Chrysler being owned by the Germans now and the state haveing all kinds of trouble if people were better off. Why don't we import some Chinese CEOs as well as they sure seem to know what to do..

[torgo]

I could be wrong but about this but we wouldn't have Chrysler being owned by the Germans now and the state haveing all kinds of trouble if people were better off. Why don't we import some Chinese CEOs as well as they sure seem to know what to do..

You seem to be forgetting that the big reason that GM and Ford are losing money and laying people off is that they make a crappy product when compared to their foreign competitors. If people were better off, i.e. were paid more, it wouldn't make a bit of difference. MJLO said it best. Don't rely on the gov't or some stupid company, work your a** off and save for your own retirement. 401Ks and pensions are fine, but don't rely on them entirely or you could end up without a dime. Diversify your sources of retirement cash.

And I agree with Jeff. Don't blame bush, that's stupid. The President has little to do with the state of economy. This "rewarding the rich" theory that the left always talks about is ridiculous.

And lets not turn this into a good Bush/bad Bush conversation......

[allbusiness]

Last I heard the open, free market sort of works to set the "value" of a person's work. If the value of producing a widget -- which can be produced any where in the world -- is $12 an hour now, then that's what will be paid. It doesn't matter that it used to be valued at $27/hour.

If the open market value of a major corporate CEO is $250 million a year, then that's what that is worth too.

No one "sets" these numbers. This is not a communistic society where all prices , wages and values are set by the "state".

Like it or not, I can make a six figure income in corporate sales while my next door neighbor makes $16,000/year in retail. We have the same education, the same type of house and the same number of kids to support. Somewhere along the line we each made choices about careers. There is nothing obscene about this.

[GaryP]

Indeed. Henry Ford pioneered the idea that a strong middle class would make his company very profitable in the long run, so he paid them a very good salary. This idea started in Michigan. Now we have the CEO of Delphi, who thinks it is a good idea to get rid of the fat lazy inefficient American worker and replace them with workers in China who get paid $1/day if that. The rich get very rich and the middle class disappears and has to move to Fla to push around boxes in the local Walmart there. Sounds like a plan to me.

I could be wrong but about this but we wouldn't have Chrysler being owned by the Germans now and the state haveing all kinds of trouble if people were better off. Why don't we import some Chinese CEOs as well as they sure seem to know what to do..

Another exerpt from the same article I mentioned yesterday.

Consider the benefits package, now worth some $40/hr on top of wages, for workers at Delphi, GM and other Detroit car companies.

The gold plated medical benefits provide free choice of treatment with virtually no co-pays or deductibles. Retirees also get defined, and generous, pension payments for as long as they live, instead of the 410(k) accounts more typical nowadays. And workers can collect full pensions after 30 years on the job. They can retire around 50 and collect medical and pension benefits for more years than they actually worked. The contract forbids factory closings, and requires that laid-off workers get close to full pay and benefits while waiting in the "jobs bank" for real work. Delphi is paying out $100 Million per quarter to 4,000 idle workers, Mr. Miller (idiot) says.

Anyone who doesnt think this union deserves to be broken is crazy.

[RiversideGator]

metro: Henry Ford didnt have to worry about international competition. The fact is that competition is a good thing. It provides more innovation and a cheaper product for the consumer. Yes, some individual companies will lose out through competition, but this is the natural order of things. If it was not so, we would still be riding around with horses and buggies. And, China currently has a comparative advantage with manufacturing some products because of the fact that its workers will work for virtually nothing. As for the state of the US economy relative to the rest of the world, see this list: http://www.cia.gov/cia/publications/factbo...r/2004rank.html

As you can see, we are the richest large country in the world. Our per capita GDP is $40,100 as compared to China's per capita GDP of $5,600 (and rank of #121 in the world behind such economic powerhouses as Turkmenistan, Algeria and French Guiana). China is just the sweatshop for the world and they are not taking down the US any time soon. China, along with Walmart, has become the new bugaboo for the American left.

[monsoon]

China is just the sweatshop for the world and they are not taking down the US any time soon. China, along with Walmart, has become the new bugaboo for the American left.

If things were so good I assume this would be a "whats right with Michigan thread".

I don't think many people on this forum would agree that jobs going to China, overpaid CEOs and Walmart are good things for the USA economy.

[GRDadof3]

Glad to see you guys are so concerned about what is going on in Michigan

[RiversideGator]

I don't think many people on this forum would agree that jobs going to China, overpaid CEOs and Walmart are good things for the USA economy.

I just explained why this is not a sky-is-falling situation. Economics 101.

Glad to see you guys are so concerned about what is going on in Michigan

GRDadof3: Sorry for highjacking your thread. Lower taxes and regulations and eliminate the power of the unions and the economy will take care of itself. Good luck Michigan!!

[RustTown]

It's about what kind of economy you'll have if you do that. Some states are comfortable with calling a perpetual "Walmart Economy" or "Walmart State" economic development. Personally, I'm not.