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April 22nd, 2012
Many of us have friends or family members that have moved away from the Midwest.
In the Changing Gears special “Where Did Everybody Go?” we’re talking with some of those people who have moved out of the region – asking them why they left, what they found, and if they’ll ever come back.
We also take a look at what their departure means for the region.
You can listen to some of those stories here.
Part II: The Appeal Of Portland
Part III: Detroit Coney Dogs On The Sunset Strip
Part IV: A Generation Moves Off The Farm
April 20th, 2012
No city has been more affected by Midwestern out-migration than Detroit.
Based on the latest census numbers, the city is losing about 2 people every hour.
Changing Gears has been talking with some of those people who are leaving our region.
Alex Ozark grew up in Detroit. He always wanted to work in the auto industry, but he’s not doing it with the Big Three. He’s doing it in California.
Charla Bear brings us this report:
Alex Ozark drives like a maniac in his company’s cars, treating a black SUV like a cross between a tank and a sports car.
“So we’ll do, we’ll do a hot lap.”
He deliberately hits potholes, runs over lane dividers, and takes corners really fast. So fast, I have a death grip on the grab handle.
I’ve heard bad stories about SUVs and rollover. “When the tires are squealing, everything’s ok,” says Ozark.
I sort of trust him. I mean, it is his job to know these things. He’s a durability engineer for Hyundai and Kia. That means he tests out vehicles at the company’s proving grounds, a set of tracks in the California desert designed to simulate different driving conditions. That is, if you stay on them.
“The plus is, when you go off, no big deal,” says Ozark.
In fact, he’s clearly thrilled by it. The 25-year-old says he’s wanted to push cars to the limit ever since he was a kid in Metro Detroit.
Growing up in the shadow of the Big Three US automakers, it’s probably tough not to fall in love with cars. Ozark gave his heart to one in particular at an early age.
“The Dodge Viper. Classic child’s love car, right?”
Not that he cares if you agree. To him, this car was the ultimate machine. It was even his reason for going to the University of Detroit-Mercy. He enrolled in the in the fall of 2004.
“At that time, it seemed like, oh man, this is going to be great. In 2008, there are going to be so many engineering possibilities and jobs available. This is like, the perfect job,” he says.
Of course, that’s not how it turned out.
In 2007, General Motors reported nearly $39 billion in losses. By the time Alex graduated from college, GM and Chrysler were headed toward bankruptcy.
“It was always just growing in the back of my head – you know what, customers don’t want this. There’s no innovation. There’s nothing new. This isn’t good. I don’t like you anymore,” he says.
With his sights no longer set on the Big Three, he says he really had no reason to stay in Michigan. Almost everyone he grew up with was gone. His mom and stepdad had moved to Virginia, his best friend was in San Diego. He started thinking about looking for a job in California.
“The sun is always out – it’s the Golden State. And I thought, there’s no better place to go work,” says Ozark. He figured with the state’s focus on high-tech and the environment, he was bound to find an innovative company. He saw an opening in the development group at Hyundai Kia and jumped on it.
“And, when I went there, what I saw were vehicles coming down the line that were now 40 miles per gallon vehicles, hybrids and electrics down the line. I can’t fathom doing anything else.”
So, you might think when GM came out with the Volt, one of the most fuel efficient cars on the road, it would change his opinion of The Big Three. Maybe rekindle a little of that passion he used to have. It didn’t. “I can’t extrapolate the Volt to the whole company,” says Ozark. “It’s just such a niche little product that they have that they aren’t even selling that much of.” Alex doesn’t buy that The Big Three have changed.
Chris Perry is vice president of marketing for GM’s Chevy line. The company brought him in a year and a half ago to help improve its image. He says his job would have been much harder before the automaker went belly up.
“If you look back on the history of our products, there were some pretty unspectacular products. That’s just the reality,” says Perry. He points to the Aveo and Cobalt, two compact cars the company no longer makes.
“We have to start with ‘What does the customer want out of this segment?’ and build a car that meets that [sic] criteria.”
GM’s market share is at a 90-year low, but it turned a record profit last year and it’s drawing budding engineers who are eager to help the company move in a new direction.
Scott Lenanna is a test engineer for abuse and safety testing of batteries at GM.
Lenanna has a lot in common with Ozark. He is 20-something, into cars, and he moved from home to find work. The only difference is that he is a California boy who came to Detroit.
“I’ll move to wherever the innovation and excitement is,” he says, but he never imagined that would be in Detroit, or at a US automaker. He always pictured himself at a Silicon Valley startup. But now that GM is into hybrid and electric cars, he sees things differently.
“I don’t think batteries are perfect right now, but us putting the Volt out into the market is pushing battery companies to innovate. So, not only are we innovating, we’re pushing other people to innovate.”
He says Detroit could use more young engineers with their “heads in the clouds” to help car companies think in new ways.
So does any of this convince Alex Ozark? Would he consider moving back?
“No. This world is pretty vast. It doesn’t make sense to go back to where I started,” he says. Not even if the Big Three produced the most amazing, innovative cars out there. Not even if they paid him a fortune. He says California is too much fun. He gets to ride a motorcycle, snowboard on real mountains, and skateboard by the beach. Most of all, he says just being there makes him a happier person.
“It seems like the dreariness and grayness of the skies in Michigan, it always had me depressed. As soon as I came out here and it was sunny – instant change,” he says.
Yet, no matter how much he says he’s done with Detroit, there are some ties he can’t sever.
On the Sunset Strip in Hollywood, Ozark introduces me to one of his favorite places in all of L.A., Coney Dog, a Detroit-style hot dog joint. He lights up as we make our way to a booth, past black and white photos of the city, hockey figurines and a waitress whose shirt says Detroit Grrrrl.
“It’s instantly comforting. The whole atmosphere. The diner feel. The Coney Dog availability,” says Ozark. And the Coney Dogs are the real deal, flown in from the Motor City and complete with Greek-style wet chili. The burgers are loose – no overly pressed patties here. Alex Ozark orders one of each.
“It tastes exactly like this place Comet Burger in Royal Oak. It’s perfect.”
So good, it’s worth the three-hour round trip – even if he’s by himself. But when he’s here, he’s never really alone. This place is a hub for displaced Michiganders, and he says they share a camaraderie that instantly makes him feel at home.
April 17th, 2012
Last year, everyone in the auto industry was chuffed about Detroit’s comeback.
The carmakers were enjoying a healthy rebound from the bankruptcies at General Motors and Chrysler. And for a while, at least, Chrysler outsold Toyota to make the Detroit Three the Big Three again.
But this year, Detroit’s market share has been slipping, and that has ramifications all across the Midwest.
In fact, the auto companies have fallen back to the market share level they held in 2009, as GM and Chrysler were struggling. In a piece for Forbes.com, I look at what happened to the Detroit companies during the first quarter.
Basically, there are three issues:
1) GM and Ford are losing share. In March, GM’s market share fell to a 90-year low. And while Ford’s car sales are up in 2012, they aren’t up as much as the competition. That’s one way a company can lose share, by not keeping up.
2) Toyota got stronger. Japan’s biggest carmaker was battered by millions of recalls, the tsunami and earthquake and floods in Thailand. But its market share is climbing back, thanks to new members of the Prius family, and the newest version of the Camry.
3) Korean and European companies are gaining. Hyundai and Kia are causing headaches for all kinds of automakers with their sales gains. Volkswagen is picking up market share, too, and it’s planning to build more cars at its new plant in Tennessee.
Here’s how Detroit’s market share looks, according to Autodata, Inc.
2012: 44.3 percent (through March)
2011: 47 percent
2010: 45.1 percent
2009: 44 percent
April 9th, 2012
The Federal Reserve Board of Chicago is out with its Midwest manufacturing index for February, and the numbers are something of a milestone.
The Chicago Fed uses 2007 as a baseline, meaning 100 on its index, which the Fed calls “a composite of 15 manufacturing industries that uses hours worked data to measure monthly changes in regional activity.” (We like to think of 100 as basically full staff.)
In February, the manufacturing index, which covers Wisconsin, Iowa, Illinois, Indiana and Michigan, stood at 91.7. The number for automobile manufacturing was even better — 92.2 — while steel manufacturing stands a tad behind, at 90.5 percent.
But that’s an important number, as we’ll explain.
Since the index goes up about a half a percentage point to a point per month, you might extrapolate that the region will be back to 100 by the end of the year. Of course, there’s no way to really nail that, given high gas prices and other economic factors.
But the real story is in the historic numbers.
Take a look at where the MMI stood in June 2009. It was at 67.9, the low for this recession.
That was the month that General Motors filed for a federally sponsored bankruptcy. Chrysler, which was just out of its bankruptcy, had shut down its plants that spring while it was under court protection, and it hadn’t yet cranked them back up.
The automotive number reflects the industry’s crisis: it was at 48.5 in May 2009. Steel, which relies heavily on the auto industry, reached its low for the recession in June 2009, at 57.3.
It has taken the index and both industries until this year to get back into the 90 range. For the overall index and for autos, that happened in January. Steel is back above 90 this month for the first time since the depth of the recession.
So in short, a couple of industries that were in pretty awful shape three years ago, are within shouting distance of normal when it comes to hours worked by those who are employed there. And, the improvement is showing up in an important measurement.
Jennifer Knightstep was a researcher in the media archives at General Motors until she was laid off in 2008. Her first reaction was fear.
“I panicked for a few minutes, and then I tried to think of what I wanted to do next,” she says. “There’s not a big demand for archivists in Metro Detroit or anywhere else for that matter.”
So instead of trying to get a similar job, Knightstep decided to go in a new direction.
“I thought maybe I should start trying to do what I really wanted to do, which was be a writer.”
When she filed for unemployment, she learned about No Worker Left Behind, a program in Michigan that offered up to $10,000 in tuition for degrees in emerging industries. NWLB was scaled back in 2010 following federal funding cuts.
When most people think about growing fields, freelance writing is not the first job that comes to mind, but Knightstep made it work.
She went back to school and graduated with her associate’s degree in December 2011. She has been working as a freelance writer since November 2009.
“I figured education wouldn’t hurt in my quest to become a writer, so I took advantage of No Worker Left Behind and I started taking college classes,” says Knightstep.
“I had no idea what to expect. To be honest, I was really afraid…I expected to be the oldest person in the room and usually I wasn’t. I expected everything to be difficult and I expected to feel really strange, but it was wonderful, actually,” she says.
Knightstep is now self-employed.
“I’m a freelance writer slash reporter and photographer for a couple of local publications,” she says. ”Last year I finished my first book…and right now I am working on a story for the society of automotive engineers in Detroit.”
For the newly unemployed, she offers this advice: “Take advantage of whatever programs [you] can and be bold from the beginning. The only regret I have is that I spent that couple of weeks being fearful, being timid. I wonder how different things would have been if I was intrepid and bold from the start.”
This story was informed by the Public Insight Network. If you want to learn how to be a part of our network, click here.
March 26th, 2012
“I don’t even know what street Canada is on,” Al Capone once said. But Canada’s prime minister, Stephen Harper, is determined to make sure he puts Canada on the map with one key global power: Japan.
If he accomplishes his goal, it could have ramifications for the automobile industry, agriculture and the Midwest in general.
Harper opened negotiations this weekend with Japan on a free trade agreement. Negotiators were careful to caution against any quick resolution, because it can take years to negotiate such deals, and Japan isn’t known for speedy decision making.
But, a Canada-Japan trade agreement would join one between Japan and Mexico — and leave the United States as the only North American country without one.
There are some big trade numbers involved. Canada ships $4.6 billion in goods each year to Japan, and imports $12.8 billion, largely in automobiles and auto parts.
“Canadian businesses have much at stake in these negotiations,” said Jayson Myers, president of the Canadian Manufacturers and Exporters association. “Japan is a strategic commercial partner; however it is also a country with whom we’ve had a persistent trade deficit when it comes to manufacturing.”
There’s no guarantee that a trade agreement would change the trade deficit, but there could be some significant changes as a result. For example, Canada charges a 6.1 percent tariff on imports of Japanese autos and auto parts.
The United States charges a 25 percent tariff on imports of small trucks, and it’s imposed various penalties in the past.
A free-trade agreement could help sway Japanese automakers, who recently have been on an expansion drive at their American factories and could send more production overseas due to the strong yen.
Toyota recently indicated that it might expand at its Cambridge, Ontario, plant, and friendly relations between the two countries might influence Toyota, or another Japanese automaker when it’s time to choose a plant site.
And the pact could mean more opportunities for Canadian farmers, who have always faced obstacles in shipping products to Japan.
As you’re thinking about Canada, here’s list of 10 songs by Canadian artists about our neighbor, with some familiar songs and others you may never have heard of. And no, the list does not include Blame Canada.
Americans owe close to a trillion dollars in student loan debt. Changing Gears has been reporting on that debt, a lot of which comes from attending private, for-profit schools. They’re the fastest growing part of higher education, popular for non-degree technical training. Call them career colleges, technical schools or trade schools … just don’t call them cheap.
Fact: For-profit schools cost more than community colleges. Fact: For-profit students borrow more, then default more than students from public colleges. Fact: All this explains why I ended up at the strip club in Detroit.
So I’m at Cobra’s the Grind, eyes-avoiding-buttocks, walking up dimly lit stairs to meet the manager. Steve is a big guy; he started here as a bouncer. He lays his gun down next to us as we talk. He had different life plans after graduating high school in 2006.
“Not this,” he says. “I mean, I don’t mind it now but I didn’t think I’d be here. I thought I would’ve been in a shop, turning a wrench.”
He wanted to work on cars. So he got a diploma in automotive technology at Lincoln College of Technology in Indianapolis. It’s part of a big for-profit chain. The program was about a year and roughly $25,000, not including housing. An associate’s degree from community college would’ve cost less than ten grand.
“My mom was actually talking to me about it, but I wouldn’t listen, I was stubborn,” he says. “Whoever takes their mom’s advice, until you f*** up? I regret it.”
He didn’t find a car job, but he says he did rack up about 30 thousand dollars in debt.
Victor Gregory taught Steve’s auto class back at Dearborn High School. He also teaches at the local community college. That’s partly why the cost of for-profit training worries him. He’s actually barred some schools’ recruiters from his classroom if they can’t demonstrate good student results.
“I do not want my students going out in the field and becoming balled and chained to a bank. And having to park the whole idea of having a better life, just so they can pay their debts,” he says.
The big question is return on investment: What do students get for the cost? The private, for-profit sector of higher education is so broad, it can be hard to generalize.
But take the big, publicly traded company Universal Technical Institute Inc., or UTI. It has a campus outside Chicago. The median cost of its 15 month auto tech certificate program is $30,000. According to the school, the median federal loan debt for that program is about $14,000.
Tom Riggs is Senior Vice President of Operations for UTI. He says its graduation rates are drastically better than at many community colleges.
“We graduate in the high 60%, sometimes 70% of our students who start, graduate,” he says. “If you look at community college programs and certificate programs, a lot of their numbers are in the low 20s.”
Some students are drawn to short intense training. They get hands their hands on metal, and then they can start earning money. Riggs says employment rates coming out of school are also high.
“There are students out there who four year university isn’t the right thing for them,” he says. “And they have tremendous talent and passion around the things that we do, and we are the right place for them.”
One reason yearly tuition is lower at public schools is they get public support. But David Deming of Harvard’s Graduate School of Education says for-profits get a different kind of public support. Their revenues come overwhelmingly from federal financial aid dollars. In other words, from student grants and loans.
“For-profit schools are not allowed to take any more than 90% of their total revenue from federal financial aid. That’s the maximum and quite a few schools are relatively close to the maximum,” he says.
For-profit students later default on their federal loans more often than those who attended public schools or private schools that are not-for-profit.
Still, it’s not hard to find technical school graduates who are employed and paying back those taxpayer dollars. I just went down the street to Suburban Chevrolet of Ann Arbor, where Andrew Marihugh works. He recently graduated from UTI.
“I was told it was one of the best in the country,” he says.
He’s repaying $25,000 in loan debt from his training there.
“It was worth it,” he says. “I think it was worth it. There’s a lot of people that went to school there and there’s a lot of them that didn’t know how to even change oil.”
Marihugh is now an oil change technician, also called a lube tech. That’s the most entry level position here. He’ll work his way up. And in ten years, he’ll have worked off his debt.
*This story was informed by the Public Insight Network. Add your story here.
Last night during the Super Bowl, Chrysler ran a follow-up to its much buzzed-about commercial from last year’s big game. The new commercial, dubbed “It’s Halftime in America” ran, appropriately enough, during halftime.
The ad makes it clear that Chrysler is sticking with its strategy to promote the Motor City as a way to promote its vehicles.
After declaring that “it’s halftime in America, the ad’s narrator, Clint Eastwood, says:
People are out of work and they’re hurting. And they’re all wondering what they’re going to do to make a comeback. And we’re all scared because this isn’t a game. The people of Detroit know a little something about this. They almost lost everything. But we all pulled together. Now, Motor City is fighting again.
The ad got us thinking: When people say Detroit, oftentimes what they mean is “the auto industry” or “metro-Detroit.” So, what exactly are we talking about when we talk about Detroit?
Clearly, when Dirty Harry himself says Detroit “almost lost everything,” he’s not talking about the City of Detroit. Because, if the city doesn’t get its finances in order, it could still lose “everything” and fall under the control of a state-appointed emergency manager. And he’s not talking about Detroit schools, which are already under the control of an emergency manager.
It’s arguable whether he could even be talking about Chrysler, since the company’s headquarters are a half-hour drive from the city’s borders, and the company is majority-owned by Italy’s Fiat. Also, unless you’re talking about the Jeep Wrangler or Dodge Durango, none of Chrysler’s cars are actually made in the Motor City.
These might seem like minor details. After all, few of us are confused when people use “Detroit” to mean “the auto industry.” But the distinction does matter, certainly to Detroiters. And it helps explain why the city is still struggling, even though the car companies seem to have bounced back.
As Changing Gears wrote last year, there are only two auto assembly plants left in Detroit (although Chrysler is re-opening a third this year). And GM is the only car company whose headquarters is within the city limits.
When the car companies left the city, they took with them their property tax obligations, their employee income tax obligations and a whole lot of money that the actual city of Detroit could use right about now. It’s not like we can expect these decisions to be reversed, nor would it necessarily be a good thing for the region.
But we should be aware that when a company, or a person talks about rebuilding Detroit, sometimes they’re not talking about Detroit at all. Sometimes they’re talking about a suburb (where things were never as bad as they are right now in Detroit). Sometimes, as is the case with a recent Chrysler announcement, they’re talking about Belvidere, Ill.
So how is it you can hear about the rebirth of Detroit, and a minute later hear about how the city’s finances are crumbling?
Because when people say Detroit, often what they mean is something completely different.
When you use the word Detroit, what does it mean to you?
January 26th, 2012
In the Midwest, it’s hard to get around without a car. These days, people are holding onto them longer. The average vehicle is almost 11 years old and used cars prices are on the rise. All this adds to the pressure on the bottom rung of consumers: people with bad credit. For many, the only way to finance a car is at a Buy Here-Pay Here lot. Here, dealers loan to deep subprime customers at interest rates up to 25%.
Buy Here-Pay Here makes up more than 15% of used vehicle financing in states like Illinois, Indiana and Ohio. That financing goes to people like Willie. That’s her nickname. We’re driving around Toledo in her ’99 Chevy Express. It’s got 130,000 miles on it.
“You’re gonna hear it really well,” she says. “It’s gonna be a pop pop. And then you’re gonna hear my belt.”
Honestly, Willie, Toledo and the van have all seen better days. Willie got laid off a few years ago. Now she lives on child support and she scraps. Literally.
“I’m a scrapping scrapper. I’m garbage picking basically just to feed my kids and taking whatever little job I can find,” she says.
No conventional lender wants to touch that. But when Willie’s dad was diagnosed with brain cancer, she needed a car to care for him. So she agreed to pay six thousand dollars for a van worth, maybe, half that. She keeps a tool kit handy in case it breaks down.
“Now I don’t even need it cause my dad passed away in August,” she says.
Philip Reed is Senior Consumer Advice Editor at the car site Edmunds.com. His take on the Buy Here-Pay Here market?
“It’s not one that we recommend.”
In fact, he uses the word predatory.
“Because people are taking advantage of people that are in a bad situation,” he says. “And they know they’re between a rock and a hard place. And they know the lure of having a car.”
The average Buy Here-Pay Here customer has a credit score less than 550. That’s considered deep subprime. They may have experienced foreclosure, bankruptcy, or a prior repossession. What makes Buy Here-Pay Here different is the dealer finances their loans himself. He is the bank, he takes a lot of risk, and he charges for it.
Melinda Zabritski is Director of Automotive Credit for Experian Automotive. She says Buy Here-Pay Here offers a valuable service to consumers who might otherwise be shut out of the market.
“You typically will see higher rates,” she says. “However, there’s also a much higher frequency of delinquency. People who work in this space might end up repossessing 60% of the vehicles that they’re financing.”
Now, critics see high repo rates as evidence of loans that are designed to fail. Matt Ghazal is trying to fight that shady reputation. He runs a Buy Here-Pay Here chain called Express Auto in West Michigan.
“The biggest misconception is we’re loan sharks and we gouge on payment and we gouge on price,” he says. “Although there are some that do, the vast majority of dealers out there are fulfilling a niche. And making an honest profit and providing an honest service.”
In the office, Ghazal posts tips on test driving, building credit, and not committing to more than you can pay. (Here’s a longer version of those tips, from the Federal Trade Commission.) He says about one in five of his customers don’t complete their payments. But the other four do, or they trade up.
“We try so hard to keep them in the vehicle,” he says. “We win when they stay in the vehicle.”
And come back to do business again and again. Still, it’s striking just how much it costs to have no money. Grace Diaz is 19, works three jobs and goes to school. Every other dealer turned her down. No credit.
“I’ve been trying for so long,” she says. “This is really nice to be finally done.”
She settles on a 2002 Pontiac Grand Prix. Team leader Paul Lucas breaks down the cost.
“The price of your vehicle is $8,995,” he starts.
Add in taxes, fees and a service contract:
Plus almost 20% interest over three and a half years:
“The total estimated amount of your payments comes to $15,375 and 30 cents,” he says.
$15,375 for a 2002 sedan. With the money she’s paying in interest alone, Diaz could buy a car outright. But she doesn’t have a lump sum, she has enough to pay the bills this week. When she drives off, Grace Diaz is excited and very grateful. She has to be at work in an hour.
Dustin Dwyer · Midwest Memo: Abbott Posts Layoffs, Auto Industry Posts Openings And A Target For Cabrini-Green
January 26th, 2012
Layoffs at Abbott North-Chicago based Abbott Laboratories is laying off 700 workers in the U.S. and Canada. The Chicago Tribune reports 200 layoffs will be at the company’s campus in Lake County, Ill.
Don’t call it a comeback One analyst predicts the auto industry will add 15,000 jobs this year. But the Detroit Free Press reports that still won’t come anywhere close to replacing the jobs that were lost.
Job training, streamlined Ohio governor, John Kasich says this year, job training is “going to be, probably my seminal issue.” The Columbus Dispatch says streamlining Ohio’s current job training programs is at the top of the governor’s to-do list. Right now, Kasich says the state has 77 training programs across 13 agencies.
Radically local consumerism Residents in Chagrin Falls, Ohio decided to “occupy” their locally-owned hardware store over the weekend to help generate some business. USA Today says by 10 a.m., the store was jammed with a “cash mob.”
This is where we used to live It’s official, the former site of one of the country’s most violent and infamous public housing projects has been bought by Target. Crain’s Chicago Business reports Target bought the former Cabrini-Green property for $8.8 million.