The automotive melt down: how it's burning black America: higher gas prices, loss of industry-related jobs are crippling businesses, consumers

Ebony, Nov, 2008 by Frank S. Washington

Michael Johnson calls it expense control. A Black new car dealer for almost 20 years, his Michael Chevrolet dealership in suburban Detroit employed 78 people just three years ago. That's now down to 58 folks. What's more, he keeps fewer new cars and trucks on his lot, sells cheaper used cars and spends almost nothing on advertising.

"It's tough as hell out here," he says. "I've been doing this for 20 years and I have never seen it this bad. It's constantly shifting every quarter. Something new happens that makes us have to rethink our business strategy."

A lot of Johnson's ills can be blamed on the escalating price of gasoline that has stanched demand for products that domestic automakers do best--full-size pickup trucks and sport utility vehicles. But the uncertainty caused by high oil prices, the mortgage debacle and job losses have combined to accelerate the meltdown of the domestic automotive industry.

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In other words, Johnson is not alone. When he started in 1990, Johnson says General Motors had 127 Black dealers. That's now down to about 38 and Johnson expects up to a half-dozen of GM's remaining Black dealers to be out of business by the end of the year.

The upheaval inundating Black communities because of the failing automotive industry is like a financial tsunami. You see a swell in the water, but the immense danger is not realized until the wave hits. Black advertising agencies, Black automotive assembly line workers and Black automotive suppliers are being sucked under and out of the auto industry. It's like a riptide that you cannot see but, nonetheless, can be fatal.

The importance of the auto industry in shaping modern-day Black America cannot be understated. For generations, it was the lynchpin of a manufacturing base that lifted tens of thousands of Black families out of the ranks of poverty and the working poor and into the middle class and the upwardly mobile.

University of Pennsylvania historian Thomas Sugrue says the automobile industry reshaped urban America. The industry's economic influence stretched from lower New England down to Pennsylvania and across the Appalachians westward through Ohio, Indiana and Illinois. It drew raw materials needed for automobile production from the coal regions of Pennsylvania and West Virginia to fuel the steel mills of Pittsburgh, Youngstown, Cleveland, Gary and Chicago. There was rubber from Ohio and iron ore and copper from northern Michigan and Minnesota. What's more, Blacks were employed by the industries that were directly or indirectly related to the building of America's cars and trucks.

Now those high-paying jobs are gone. True, Asian and European automakers have replaced many of those manufacturing plants with assembly operations of their own. Alabama, Georgia, Kentucky, Tennessee, Mississippi, South Carolina and West Virginia now boast automotive assembly plants. However, because foreign manufacturers have located in mostly rural, southern areas and get major components from their home markets, they don't have anywhere near the economic impact on Black communities that were once the domain of Chrysler, Ford and General Motors.

"There is no area of the Black community that has not been affected by the automotive downturn," says Glenda Gill, executive director of the Rainbow Push/CEF (Citizenship Education Fund) Automotive Project. "Looking beyond job losses, businesses like restaurants and stores have been impacted; it's crimped tax revenue, which impacts city services and schools. It has a domino effect; the impact goes from one thing to another."

Worse, for more than a generation, automotive jobs in Black America have slowly declined. A national magazine ranked the 10 fastest-dying cities in America and each one had been home to some facet of auto building. Bad decisions combined with bad luck have domestic automakers facing the perfect economic storm.

The oil crisis of the early '70s forced American consumers to turn to small, fuel-efficient cars. The Asians had them, the Big Three (Chrysler, Ford, GM) did not. Then Asian carmakers began producing vehicles in this market and gained an advantage in lower production costs. They then began building bigger, more reliable cars. The Big Three, in effect, ceded the midsize car market to foreign manufacturers and focused on more profitable pickup trucks and sport utilities. During last year's contract negotiations, the Big Three was finally able to wrest concessions out of the United Auto Workers union that allowed them to pull even with Asian manufacturers in terms of labor costs. But the price of gasoline shot up, squelching the sales of pickup trucks and sport utility vehicles. That has spurred yet another round of domestic plant closings, buyouts and layoffs.

Now, domestic manufacturers and Black America are faced with an automotive meltdown. The Big Three--they're not even called that anymore--saw their North American market share decline from 70 percent to less than halt; 47 percent, during the last 10 years. As they've struggled to get their costs in line with competitors and cut their size down to match their sales, domestic manufacturers are closing even more plants and laying off more workers.