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Civil unrest over the city's condition ignites Detroit in 1967, resulting in 43 deaths, 7,000 arrests and $50 million in damage.

Obama Lowers Boom on GM

POSTED: March 31, 2009, 12:00 am

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Facing continued criticism over the federal government’s bailout of troubled financial firms and automobile manufacturers, President Barack Obama lowered the boom on an iconic company of the nation’s industrial age – General Motors. Over the weekend the White House let it be known that it wanted the immediate resignation of GM Chairman and CEO Rick Wagoner as a pre-condition for the government’s continued financial support of the embattled auto company. Mr. Obama announced, “GM has made a good faith effort to restructure over the past several months -- but the plan that they've put forward is, in its current form, not strong enough. However, after broad consultation with a range of industry experts and financial advisors, I'm absolutely confident that GM can rise again, providing that it undergoes a fundamental restructuring. As an initial step, GM is announcing today that Rick Wagoner is stepping aside as Chairman and CEO.”

It was a move that some had called for months ago when it was clear GM needed government support to stay afloat but the President opted to stay out of the fray and let Wagoner try to dig the company out. The nation’s largest automaker was not the only recipient of an ultimatum. Mr. Obama let it be known that he wanted Chrysler to come to terms with foreign automaker Fiat as an affirmative step toward the country’s restructuring.

In making the announcement regarding the work of his Auto Industry Task Force, President Obama said, “I'm announcing that my administration will offer GM and Chrysler a limited additional period of time to work with creditors, unions, and other stakeholders to fundamentally restructure in a way that would justify an investment of additional taxpayer dollars. During this period they must produce plans that would give the American people confidence in their long-term prospects for success.”

The problem extends beyond the automakers and puts significant pressure on auto suppliers as well. For some time now the companies that provide parts to the automakers have also been hanging on a string as the downturn in the economy combined with slow car sales had put suppliers at risk of going under. The infusion of federal dollars into GM and Chrysler had been looked upon as good news but the turn of events over the weekend will likely push the major parts suppliers to the brink.

The move on GM sent shock waves on Wall Street as the Dow dipped 250 points on the news as investors expressed wariness over the efficacy of the move against the two automakers. Perhaps even more important was the message it sent to organized labor, a key constituency of the President, that the economic landscape had changed so drastically that even old alliances would have to be put on the back burner. The news is a blow to auto workers, as they have been struggling to save jobs while also being forced to make concessions that would have never been considered during more robust economic periods. As all autoworkers in Detroit face an uncertain future, the impact on Black workers might be immeasurable. The auto industry was one of the few safe havens, and albeit not completely, for Black workers who headed north during the Great Migration. The auto assembly plant became one of the few places where Black workers could go, be trained and gain access to good wage jobs with benefits.

The fallout could represent a serious blow to the labor force participate rate for Blacks. While high unemployment is regularly acknowledged for Blacks, and in particular Black teenagers, the degree to which Black Americans are severed from the labor market is generally not recognized. In the case of the possible fallout from the latest plan for the rescue of Detroit automakers, the city and surrounding communities may see a significant upward tick in the number of Blacks who have abandoned their search for work and are thereby undetected by “official” unemployment statistics. Making matters worse is that there is no emerging industry in the Motor City that can replicate the number of jobs lost in auto manufacturing or even arrest the loss of jobs. The wages and benefits that many Black autoworkers received may never be duplicated and their skill set is such that it qualifies them for a narrow swath of jobs; many of which no longer exist as the economy restructures.

For Detroit, a city with 22 percent unemployment, the President’s actions are simply the latest blow to the “Motor City.” He noted the impact on Michigan and its communities, saying, “Over the past year, our auto industry has shed over 400,000 jobs, not only at plants that produce cars, but at the businesses that produce the parts that go into them and the dealers that sell and repair them. More than one in 10 Michigan residents is out of work -- the most of any state. And towns and cities across the great Midwest have watched unemployment climb higher than it’s been in decades.”

Over the last year the city of Detroit suffered through a political scandal that saw a once promising, young mayor convicted of wrongdoing and sent to prison, along with his top aide. A fierce campaign is now underway for the mayoralty, pitting current Detroit Mayor Ken Cockrel against NBA Hall of Famer and longtime Detroit businessman Dave Bing. The city’s economy has been at the forefront of the campaign, particularly competing visions for the city’s aging Cobo Convention Center, and will now be even more prominent with the possibility that GM or Chrysler, or both, may be at the end of their rope. Both mayoral candidates will now be challenged to imagine a city in which the auto industry plays a diminished role in its future. As if the bad news for GM was not enough, the city's two daily newspapers, the Free Press and the News, switched to a limited publication schedule as a cost cutting move yesterday.

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