Tiny car tells story of General Motors comeback

Chevrolet's 2013 Sonic Stan Honda/AFP/Getty Images

DETROIT When the word reached the Orion Assembly Plant, it spread along the serpentine assembly line like news of a death or natural disaster: General Motors (GM), the biggest automaker in the world, had filed for bankruptcy protection.

On that grim day in 2009, Chevrolet and Pontiac sedans kept rolling down the line. And 1,700 worried workers stayed at their stations even as GM announced it would close the plant in a desperate bid to survive.

"The unknown was the scariest part," recalled Gerald Lang, who had worked at Orion for two years installing dashboards and doors. "We really had no clue what was going to happen."

Nearly four years later, Chevrolet vehicles are still moving down the assembly line under the plant's 82-acre roof. Lang and his co-workers now build the Sonic, the best-selling subcompact car in the nation. It's a vehicle no one thought could be made profitably in the U.S., by a company that few people thought would last.

But GM has not only survived, it has earned $16 billion in profits in the past three years. And the industry is on track to make this year its best year since 2007.

Detroit's comeback is the work of many: President George W. Bush, who authorized the first bailout loans; President Barack Obama, who made more loans; workers who took lower wages and focused more on quality to compete with foreign rivals; and executives and designers who developed better cars amid the financial maelstrom happening around them.

However, there are victims: Shareholders, auto-parts makers and other suppliers who went out of business, as well as taxpayers who will never get all their money back.

But there is no denying that American carmakers have made a recovery. Nearly 790,000 people now have jobs building cars, trucks and parts, up 27 percent from the dark days of 2009. The story of the Sonic shows how the industry, along with a community in a downtrodden state, got there.

The downward spiral

The collapse of the industry in 2008 that nearly put GM and Chrysler out of business and cost Ford billions of dollars came from a perfect storm that included the Great Recession, expensive gasoline and the financial meltdown that dried up funding for car loans. But the automakers' problems were years in the making.

They had business models that couldn't generate enough cash to cover expenses. They had too many factories making too many cars and trucks. They sold too many vehicles at discounts or even steep losses just to move them out of showrooms to make room for more. And their workers earned more in wages and benefits than Japanese competitors.

Even when autoworkers were laid off, companies couldn't get them off their books. Union-mandated "jobs banks" forced automakers to keep paying workers whose plants had been shut down. They got paid to sit in rooms and do crossword puzzles.

Years of losses caused the three U.S. automakers to rack up $200 billion in debt, about half the liabilities that are now strangling Greece. GM alone lost $82 billion in the four years before bankruptcy. All three companies had to pay escalating health care costs for workers and a staggering half-million retirees - a number about equal to the population of Portland, Ore. At GM, medical costs for workers and retirees added $1,500 to the price of a car.

An increasingly bad situation turned worse during the 2001 recession, which was followed by rising gas prices that lasted for most of the decade. Then came the 2008 financial meltdown. As GM and Chrysler careened toward bankruptcy, President Bush stepped in, loaning $17.4 billion to GM and Chrysler just before he left office. But auto sales remained in a free fall, plummeting to a 30-year low of 10.4 million by the end of 2009.

At the Orion plant, the recession had slowed sales of the midsized Pontiac G6 and Chevrolet Malibu cars that were made there. In February 2009, the company eliminated a shift and laid off 400 workers. The outlook darkened even more when GM announced it would dump the Pontiac brand. Since the G6 made up half of Orion's production, workers feared the plant was doomed.

It didn't take long for issues inside the plant to ripple outside to the surrounding concrete industrial parks. Dozens of auto-parts companies laid off workers. At Casey's Chicken, a barbecue joint in a nearby strip mall, a healthy side business catering GM birthday and retirement parties dried up.

About that time, Orion Township's chief executive, Matt Gibb, got a call from Ed Montgomery, President Obama's auto-recovery czar, telling him the plant was on a secret list of GM factories to be closed. The factory was the township's largest employer and taxpayer. About a third of its 35,000 residents work for GM, Chrysler or parts suppliers.

As Gibb watched the local economy unravel, he was haunted by a documentary he had seen about Janesville, Wis., where another GM plant had closed, leaving behind empty industrial parks and ball fields overgrown with weeds.

"I don't want to be Janesville," he told friends.

Anguish and another chance

GM, meanwhile, was drowning, even with emergency loans from the government. On June 1, 2009, it became the largest American industrial company ever to file for Chapter 11 bankruptcy protection. It had just $2 billion in cash and $172.8 billion in liabilities.

The bankruptcy wiped out GM's debts, allowed it to shed 21,000 jobs, dump 2,600 dealers and close factories, including Orion.

"It was like somebody just took the heart out of you," recalled Mike Dunn, the chief United Auto Workers union bargainer at Orion. "You didn't really know if you would have a future."

Worries spun through his head. He had to support six kids, including two in college. He was nearing retirement after 28 years at GM, and his pension was in jeopardy. But as he walked toward the plant floor, his immediate concern was what to say to workers.

"You can't let the people know you're devastated and scared for your life," he said. "I had to tell my people to stay positive and good things would happen."

As lawyers for GM and its creditors fought in court over scraps of the company, Orion's second chance emerged.

In exchange for its $50 billion bailout, the government got a 60 percent stake in GM. The company agreed to build a tiny car known as the Sonic at one of the U.S. plants it was closing. Small-car production had long been relegated to other countries where wages weren't as high. But GM couldn't take government money and build a small car overseas.

For folks in Orion like Dunn and Pat Sweeney, the local union president, the mission was clear: Get the Sonic.

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