CLEVELAND, Ohio — General Motors’ decision to stop producing the Chevrolet Cruze at its Lordstown plant next spring is expected to harm the economy in the Mahoning Valley, from Warren to Youngstown. It could affect the rest of the state, as well.
The impact is expected to reach far beyond Youngstown, rippling throughout Ohio’s automotive supply chain for months and even years, like aftershocks following an earthquake.
But the devastation really started a few years ago. Lordstown once employed as many as 12,000 and produced 16.3 million Chevy cars and vans since its opening 52 years ago. Two years ago, there were 4,300 at the plant. GM eliminated its overnight shift in 2017 and earlier this year dismissed the afternoon shift. Today, the sprawling 6.2 million-square-foot assembly plant employs about 1,500.
Jobs Ohio, an economic development company created by Gov. John Kasich, said its initial economic analysis is that hundreds of Ohio automotive supply companies could be affected if GM closes Lordstown rather than producing another car there after Cruze production ends in March.
There are between 580 and 1,100 companies in Ohio that are in one way or another considered part of the automotive supply chain, according to the Ohio Development Services Agency and to statistics compiled by Team NEO in Cleveland.
In the City of Cleveland alone there are about 90 small companies producing auto parts, most of them the kind a consumer will never see. They are metal stampings and the sub-assemblies that make up more familiar components such as fuel injectors and water pumps.
“You would be shocked at how many parts are assembled from all over,” said Randy Solganik, owner of City Plating, an electroplating company on W. 130th Street that operates three shifts a day coating metal stampings and other small parts with zinc to make them corrosion resistant. He estimated that about 75 percent of his business is automotive.
But City Plating does not deal directly with GM. Instead, its customers are other suppliers who themselves might manufacture a sub-assembly for another supplier who deals directly with an auto maker.
For these reasons, predicting the impact on suppliers is complicated.
“Everybody will be affected, but the question is, to what degree,” said Solganik. “You are talking about thousands of parts, tens of thousands to hundreds of thousands of parts.”
GM did not say it would actually close Lordstown or any of the other plants involved, a deliberate omission, says the United Auto Workers. They suspect the announcements are the opening salvo of new contract negotiations scheduled for next summer.
In other words, GM might be persuaded to begin manufacturing another vehicle at Lordstown after production of the Cruze ends. That’s an outcome that Ohio Sen. Sherrod Brown suggested immediately after GM announced its intention to end the Cruze. President Donald Trump has said GM had better “get back to Ohio” and find another vehicle to make at Lordstown.
The potential impact of closing an auto plant on the overall economy is another question, one that economists are struggling to answer.
Manufacturing Works, a membership-based non-profit economic development organization in Cleveland, took a swing at that question this week.
Starting with the assumption that one high-paying job in an auto assembly plant creates 10 other jobs, including not only auto supplier jobs but other unrelated jobs in a community, Manufacturing Works projected that the shutdown of Lordstown will lead to the eventual loss of as many as 43,000 jobs in Ohio and across the industrial midwest.
John Colm, president of Manufacturing Works, said the 1-to-10 jobs impact is a ratio that the Michigan-based Center For Automotive Research has used.
Not all economists accept that 1-to-10 multiplier effect, though many agree that the job creation impact of automotive manufacturing is stronger than the impact of other manufacturing jobs on the surrounding economy
George Zeller, an independent Cleveland-based economist, said generally speaking manufacturing jobs create about three outside supplier jobs. In other words, three people working in jobs supplying the car plant are dependent on one job inside the plant. This does not include “induced” jobs such as barbers, bar tenders or grocery store employees.
“There will be [supplier] layoffs,” Zeller said. Some will be in Trumbull County, some in Mahoning County and others elsewhere, which happens to include Cuyahoga County,” he predicted.
Edward “Ned” Hill, an economist at the Ohio State University, also rejected the 1-to-10 multiplier and aligns more closely with Zeller’s three.
“It assumes that all the people in the plant lose their jobs, everyone in the supply chain loses their jobs, and that everyone they purchased services from loses their jobs, including government and at the funeral homes. And people do not get reemployed,” he said.
Hill also thinks GM’s announcement is as much a marker for investors as a challenge to the UAW.
“This is not just a switch by consumers from autos to trucks,” he said. “They are saying the country is at ‘peak auto’ right now,” he said, meaning the industry has an over-capacity of production and in the future may not produce as many cars annually as it does today (about 17 million).
“They [auto makers] are seeing very dense cities and regions; people are using alternative transportation. People are moving out of traditional cars with internal combustion engines.” he said.
Sue Helper, an economist and professor at the Weatherhead School of Management at Case Western Reserve University, said another way to look at the aftermath of a Lordstown shutdown is the impact on the vibrancy of the future economy without the kind of skilled jobs available in the auto plant.
“It’s not job loss but wage and purchasing power loss. Some people will take retirement earlier than they want to. Others will find jobs, but they won’t pay UAW wages. And that’s the real issue, that we are not creating jobs with that kind of purchasing power,” she said.
“The story is not so much ripple effects in unemployment,” she argued. “It’s what does the economy look like in the future in terms of purchasing power for ordinary people. And what happens to innovation loss?”
Adding to the complexity of such analyses is that GM simultaneously announced it would also stop producing five other cars next year: the Chevy Impala, the Chevy Volt, the Buick LaCrosse, the Cadillac CT6 and the Cadillac XTS, potentially laying off 14,000 factory workers and 8,000 salaried employees across several states and Canada.
Some resulting supplier job loses that should be easy to figure are those at companies that directly supply an auto maker. For example the Goodyear Tire & Rubber Co., which supplies original equipment tires to some automakers.
However Goodyear does “not expect the GM shutdown to have a significant impact on Goodyear’s manufacturing,” wrote a spokeswoman in an emailed response.
Steel maker ArcelorMittal, the largest steel company in the world, has a significant presence in the auto industry, supplying steel products to all automakers in North America, including GM, according to a spokeswoman.
“Steel is well-positioned to be the material of choice in the next evolution of GM’s business model,” wrote Mary Beth Holdford, division manager of external communications at ArcelorMittal. In other words, ArcelorMittal does not appear to be worried about GM’s decision to stop producing slowing-selling models.
One company that economists identify as likely to lose jobs if Lordstown is closed is GM’s Parma Metal Center, known also as the Parma stamping plant.
The plant processes more than 1,000 tons of steel a day for about 40 customers including a majority of GM North America- produced vehicles. The plant employs 1,344, including 170 salaried employees.
Will there be layoffs at Parma? A plant spokeswoman said the company at this time does not anticipate any layoffs at Parma because of the decision to stop making the Cruze. “At this time there is no impact,” said Cheryl McCarron.