Michigan town's pain signals hard times

Cadillac feels first ripples of an economic slowdown

Dale Young / The Detroit News

By Francis X. Donnelly / The Detroit News

CADILLAC -- This small, blue-collar city in northwest Michigan has the economic flu. It began in the outlying strip malls and spread to the factories and workers' homes. It's also beginning to infiltrate hotels and restaurants.

The source is a slowdown in the national economy. People are buying fewer cars, pleasure boats and other items, leading to the making of fewer products. That has meant plant closings and layoffs, which could lead to even less buying.

Nearly 1,100 workers, a tenth of Cadillac's population, have lost their jobs since Christmas. Four Winns boat makers, the city's flagship business, is looking for a new owner. Stage, a department store that takes up half a block of downtown, has gone bankrupt. The slowing economy is being felt throughout the United States, but is more concentrated in Cadillac because of its heavy industrial base.

It's easy to follow the consequences as they move from industry to industry because, in a city where most businesses are within walking distance, the ripples don't have as far to travel. "We're only as good as the economy," Mayor Ron Blanchard said. "If the economy is way down, we'll be way down. There's nothing we can do about it." Local merchants have tried to quell residents' fears about the fallout. They know slowdowns are influenced as much by perception as by cold economic statistics. That is, people who believe the economy will worsen will spend less, leading to a bigger slowdown.

But it's tough to mollify a community where so many residents know someone who lost a job or is in danger of doing so. The layoffs are Topic A in diners and bars, Jennifer Trofatter said. Trofatter helps run the Fast Cash pawn shop, which has been scurrying to keep up with customers -- employed and unemployed alike -- looking to trade goods for some pocket change. "People are coming in all the time," she said. "Everyone knows someone who's been laid off." Growing with industry Industry has been a part of Cadillac since the city was carved out of dense maple and pine in 1874. Its earliest settlers came to work at one of four sawmills on what is now Lake Cadillac. About Cadillac Population: 10,107 Founded: 1874 Main types of industry: Manufacturing, retail and tourism-related Biggest employer: Avon Rubber & Plastics with 892 workers Unemployment rate: 6.6 percent Estimated per capita income: $18,334 Source: Cadillac Area Chamber of Commerce

The city, which now surrounds the lake, took its name from Antoine de la Mothe Cadillac, the founder of Detroit. That's not the only tie between the two cities, old-timers say. Cadillac has been a steady supplier of rubber products to the auto industry since B.F. Goodrich opened a plant here in 1937. The plant helped revive a community whose lumber industry was decimated by the Depression. Goodrich moved out of town in 1959 but some workers stayed behind to eventually open several rubber companies that became the new mainstay of the community. One of them was James Frisbie. "This was a town where industry had a good chance to succeed," said Frisbie, an 88-year-old retiree. "The chamber of commerce did a lot to promote industry." The auto rubber industry helped this part of Michigan flourish during the 1990s. The population within 25 miles of Cadillac grew 15 percent during the decade, from 58,747 to 67,395, according to the Census Bureau.

Cadillac ran out of places to put the new residents so they spread into the surrounding rural communities. Chasing those denizens is a plethora of retail chains. For a small community whose closest metro area, Grand Rapids, is 100 miles to the south, Cadillac has a high number of retailers. The heaviest concentration is along U.S. 131 just north of Cadillac. The stretch of highway boasts several miles of businesses whose variety would rival any part of Metro Detroit.

"Everything is malls, malls, malls," said Michele Wood, a clerk at the downtown Chef's Deli. "This is not a one-horse town anymore." In the past two years, Home Depot, Meijer and Office Depot have opened large stores that the locals call "big boxes." The parking lot of the 180,000-square-foot Meijer is so large that it has posted letters so shoppers can remember where they parked. These behemoths joined Wal-Mart, JC Penney and a Kmart superstore. Among the hundreds of smaller merchants along the strip are three auto parts stores located within a block of each other. Somehow the growing population supported all these enterprises. During the go-go '90s, it wasn't a problem. More than meets eye From outward appearances, it seems like the national economic malaise hasn't reached this northern Michigan outpost. Indeed construction continues unabated. Despite freezing temperatures and snow-covered ground last week, construction workers were building a 33-unit condominium on the south shore of Lake Cadillac. Across town two surveyors measured a yard where an old home would be razed and replaced by a sporting goods store. But those projects were hatched during happier times, developers said.

The first signs of trouble appeared in late summer, when Cadillac merchants like Hermann Suhs noticed a slight drop in business from the year before. Suhs owns a string of businesses along a downtown block: a restaurant, a deli, a wine shop and a seven-room inn. "It was unusual because summer is always gangbusters," he said. "In good times we opened too many places that aren't well funded and are going to close. The pie is getting thinner and thinner."

The problem escalated in December when Cadillac's best-known business, Four Winns boat makers, suddenly closed its plant four days before Christmas, leaving its 550 workers without a job. Outboard Marine Corp., a Waukegan, Ill. company that owns Four Winns, filed for Chapter 11 bankruptcy the next day.

Outboard Marine had struggled to make money after experiencing problems with several of its marine-engine divisions, analysts said. It began to run up sizable debts and, when the economy soured in the second half of last year, it couldn't repay its tab.

Typically during a slowdown, one of the first things people stop buying are pricey toys, such as pleasure boats, economists said. Four Winns, which had 900 workers in July, already had experienced a series of layoffs before the bankruptcy. Now it's casting about for new owners of its various divisions. John Anderson, general manager of Four Winns, is hopeful that his company will be snatched up quickly, perhaps as soon as March 1. He said it was the most profitable of Outboard Marine's companies. "What makes us attractive to buyers is how well we did under those conditions," he said about Outboard Marine's faulty stewardship. "People understand that this was not a Four Winns problem."

Even if Four Winns lands a new owner by March, it will miss the critical winter boat shows, when many of its 16-foot runabouts, 32-foot luxury cruisers and other boats are sold. Also, there's no guarantee the new owner will rehire all 550 workers, or even keep the business in Cadillac.

"In good times we opened too many places that aren't well funded and are going to close. The pie is getting thinner and thinner, " says Hermann Suhs, who owns a string of businesses along a downtown block.

Bad news from Big 3 Three weeks after the Four Winns' closing, Cadillac's principal manufacturing industry caught the Detroit bug. Michigan Rubber Products and Avon Rubber & Plastics, which both make rubber products for the Big Three automakers, announced within a week of each other that they were laying off 380 workers. It represented one-third of Michigan Rubber's workforce and one-fifth of Avon Rubber's. The Michigan Rubber layoffs were indefinite, while Avon hopes to rehire the workers within a month, the companies said. In announcing the cutbacks, both companies cited the auto industry's decision to idle plants and reduce inventory in response to weaker sales. "If Detroit gets a cold we all get worried," said Bill Tencza, president of the Cadillac Area Chamber of Commerce. Residents and small businesses worry that they haven't hit the bottom yet. For Cadillac is the home of several other large employers dependent on the auto industry. Principal among them is Hayes Lemmerz and its 460 workers, who make parts for auto suspensions. Hayes Lemmerz hasn't said how it will respond to the auto industry's struggles. Among residents affected by all this is Larry Bills. Bills, 63, had driven a truck for 40 years before giving it up for a less solitary job. In April he joined the assembly line at Michigan Rubber Products. Because of his low seniority, he was one of the first workers let go in the January layoffs. He owes the IRS $19,000 in back taxes and says the paltry amount of unemployment he's chasing won't make a dent in his debt. He's thinking about climbing back into the rig. "I'll wait a couple of weeks (to see if he gets recalled), but I can't wait much longer than that," he said. "I need to make money." Wall Street, Main Street Downtown Cadillac merchants worry how the troubles of Wall Street will translate to Main Street. They're concerned that the economic downturn, which began when their cash registers rang up fewer sales and moved onto the factories, may return with a vengeance. When it comes to customers trying to save money, nothing concentrates the mind like the loss or prospective loss of a job, economists say. "Incomes tend to come down so the big thing is savings," said David Littmann, chief economist of Comerica Bank. "There's uncertainty. It will slow down growth dramatically for this year." The slowdown also raises the stakes over a battle between downtown Cadillac merchants and the chain stores on the north end of the city. When residents were flush with cash, they could support both shopping areas, shopkeepers said. Now something has to give. Downtown will lose one of its biggest names when Stage department store closes its doors in several months. The Houston-based retail chain announced earlier this month that it's closing 121 stores as part of a financial restructuring. Tourism-related businesses also are concerned how they'll weather the economic slowdown. For sure it will test one of the axioms of the industry: that the tourist trade is influenced first and foremost by the weather. That is, snow equals dollars.

This winter finally brought a rich bounty of snow to Michigan after several light years. Yet some Cadillac hotels and restaurants report a slight drop in business this season.

It seems like Cadillac is taking a fall, former Mayor Bob Pranger said. And it will take a while to get off the canvas. "The recovery will be slow because people will be more skeptical," he said. "It's going to take time for them to get back on their feet."

You can reach Francis X. Donnelly at (313) 223-4186 or

http://detnews.com/2001/business/0101/24/a01-179120.htm

-- Martin Thompson (mthom1927@aol.com), January 28, 2001