Headline: CHILL FACTOR: Manufacturing Town Broods Over Economic Slowdown

Source: The Associated Press, 14 Feb 2001

EDITOR'S NOTE - Every day the signs become clearer - after years of heated expansion, the U.S. economy is cooling down. A stock market buffeted by declining profits is just one indicator. There is also slower consumer spending, more layoffs, a rise in bankruptcies, and in general a growing concern among Americans about what the coming months will bring. With this story, The AP begins an occasional series called "Chill Factor" that will shed more light on the economy during these uncertain times.

COLUMBUS, Indiana -- In places like Skooter's Family Restaurant, amid the smell of cigarette smoke and bottomless cups of coffee, thoughts of an economic slowdown churn like an empty stomach. Factory workers belly up to the counter for casual conversation, but in the back of many minds, from this diner to kitchen tables to gas pumps and grocery store aisles across the Midwest, there's concern. Concern that a job may be gone tomorrow. Concern that the good times may be winding down.

Just up the road from Skooter's, good-paying factory jobs are being cut at Cummins Inc. and ArvinMeritor Inc. The layoffs haven't put much strain on the community yet, but it's enough to slow home sales, make smokeshop customers buy a handful of cigars instead of a box, push couples to forgo their Friday night dinners out.

"Everybody's worried," said Dave Skinner, who's worked on engine blocks at Cummins for 40 years. "People that've been on the job for 30 years are worried."

And with good reason. After years of booming economic times, sales of automobiles and other durable goods are falling, and the parts makers in the so-called Rust Belt region of the Midwest are seeing business drop. When the economy hits a bump, manufacturing states are the first to get bounced. When budgets get tight, consumers start to pass on the durable goods that are this region's bread and butter.

"You don't have to buy a new refrigerator, your don't have to buy a new washing machine, you don't have to buy a new car," said Morton Marcus, an economist at Indiana University. "You can postpone these things."

Over the past five months, layoff announcements at manufacturing plants have popped up across Indiana and surrounding states: Dana Corp. cut about 1,000 jobs in Fort Wayne. Similar numbers were lost at Outboard Marine Corp. in Waukegan, Ill., and at different factories in Cadillac, Mich. In Ohio, more than 20,000 workers have been laid off since Jan. 1, 2000.

Marcus contends that one of the key elements to the current economic slowdown, particularly in the Midwest, is the skyrocketing natural gas bills people are facing during a bitterly cold winter. "That's the thing that's really eating it up for consumers here in the Midwest," he said. "You've got to pay that gas bill before you can think about taking on new payments for a car."

In Columbus, fuel costs in general, coupled with the threat of layoffs, have forced Carol Petro's family to tighten its belt. As she rolled a rattling shopping cart from a LoBill grocery store to her car, Petro explained that her husband has been with Cummins for nearly 28 years. He needs 30 years service to retire with company benefits. "And he's worried about not making it," she said.

The tan plastic grocery bags she loaded into her trunk held staples: potatoes, pasta, tomato sauce. Absent are the cookies, candy and other assorted junk food. "Treats," she calls them. To be cautious the family has cut back on groceries and dinners out, and they try to drive less to save money on gas. "It's real scary," Petro said. "It's real scary when you don't know what's going to happen."

In this south-central Indiana city of 37,000, called The Athens of the Prairie for its historic buildings and unique architecture, Cummins has always been a rock. There was a time when working at Cummins was a status symbol, and, though Columbus now has numerous manufacturing plants, the diesel-engine maker remains one of the best paying at an average of $17 to $20 an hour.

"Everytime Cummins sneezes, Columbus catches a cold," said M.E. "Shorty" Prather, owner of Shorty's restaurant, located a stone's throw from the plant. "The whole economy of Columbus is based on the wages at Cummins."

Prather started his restaurant 55 years ago with only $2.28 in the bank. He's now financially sound, owns several hard-to-find motorcycles and boasts a statewide reputation for the finest hand-breaded pork tenderloins. "Everything I own today came from there," he said, pointing across the street to the Cummins plant, which puts countless lunch patrons in line for sandwiches, green beans and mashed potatoes. For the sake of business, and the people who've always supported him, Prather prays this slowdown ends soon.

So does Gary Snow, a manager at Cummins. After enjoying one of Shorty's tenderloins, Snow said production workers aren't the only ones worried about their jobs. "I wouldn't run out and buy a new car today, or make any large purchases," he said. "I usually take a cruise each year, but I doubt I'll take one this year."

For management, Snow said, stress also stems from having to watch others get laid off, or having to decide where cuts can be made.

Joe Magliochetti, chairman of auto-parts supplier Dana Corp. in Toledo, Ohio, agrees. "Each one of these individuals represents a family, with obligations that we all have in our communities, in our church and our schools, et cetera," he said. You're torn between the importance of the job to the company, the importance to the employee and the importance to the shareholders."

Making it worse is the fact that the industry is coming off such a long stretch of prosperous times. "It's been a good run," Magliochetti said. "I think this has been an unprecedented seven- or eight-year cycle."

But that cycle has wound down and Dana has had to layoff about 10,000 of its 75,000 employees, and close 11 facilities worldwide. "The fact of the matter is if you're servicing a cyclical customer, you end up being part of that cycle," Magliochetti said.

Many, including Magliochetti, don't believe this downturn will be long lived. But in January, manufacturing activity nationwide fell to its lowest level in 10 years, and companies are continuing to cut work forces to handle an economy that has obviously slowed down.

That leaves the looming question in the minds of mothers, fathers, managers and economists: How bad will things get?

"I think part of that depends on the weather forecast," Marcus said. "Part of it's going to depend on what's going to happen to energy prices this summer. All of these things are related to the question of which bills must the consumer pay first?"

Until that question becomes clearer, people like Cummins' Skinner and Snow, and residents in Columbus and across the region will move cautiously. "It's having an impact mentally on us," Snow said. "Where is this thing going, and how serious is it?"

-- Andre Weltman (aweltman@state.pa.us), February 14, 2001