A RED FLAG: Motor City problems filter into Midlands

Nov 16, 2008 (Omaha World-Herald - McClatchy-Tribune Information Services via COMTEX) -- TEN | Quote | Chart | News | PowerRating -- Cozad is some 900 miles from Detroit, but troubles in the auto industry hit close to home in this central Nebraska community.

Cozad's largest employer is the Tenneco Inc. plant where 535 people make Monroe shock absorbers. Late last month, Tenneco announced that it is going to close five facilities and eliminate 1,100 jobs. One of the unnamed plants reportedly makes shock absorbers.

"Absolutely we're on edge," said Robyn Geiser, executive director of the Cozad Development Corp. "When you hear about GM and Ford and Chrysler, we know it will have an impact on us."

Cozad isn't alone. About 22,000 workers in Nebraska and 45,000 in Iowa are employed in jobs related to auto manufacturing and sales. Thousands more work on auto financing or repair.

Not all of those workers would be affected by the collapse of one or more Detroit automakers, but the ripples in the Midlands would be substantial.

That reality isn't lost on Midlands lawmakers, who could be asked this week to approve $25 billion or more in emergency loans to the auto industry.

"You can connect the dots to Nebraska," said Sen. Ben Nelson, D-Neb. "That means I'm not going to reject this (bailout) out of hand."

In an interview, Nelson brought up the plant in Cozad and other operations in the state that make hoses, dashboards and other parts for the big car companies. He also pointed to the many dealerships that sell new cars and trucks across Nebraska.

But Nelson also said he's not interested in saving the Big Three with taxpayer money unless the companies are prepared to change.

"They've just been outdone by foreign automakers for so long that you would think by now they would have gotten it, but they don't get it," Nelson said.

His reservations were echoed by others in the Nebraska and Iowa congressional delegations. They said they want assurances the auto companies will be viable over the long term and not return in six months asking for more help.

Several expressed concerns about wage and benefit packages the companies have negotiated with workers.

"I don't know that we should be using tax dollars to fund pensions in the industry," said Rep. Adrian Smith, R-Neb.

Some economists say the nation might be better off, in the long run, if the major U.S. automakers were allowed to fail. In the capitalist "circle of life," they say, weak companies die and others take their places, and U.S. workers find jobs building Toyota Camrys instead of Chevrolet Malibus.

Not everyone agrees that U.S. auto companies are to blame for their current troubles, or that they should be allowed to fail. And few people welcome the disruption and at least short-term job losses that would result.

Already, the weak economy and credit crunch have sent U.S. auto sales to their lowest level in 17 years, and the slowdown has been felt in the Midlands.

Just this month, the Grand Island, Neb., area learned it would lose 140 jobs when the Leon Plastics plant in Alda closes next year. It makes dashboards and other plastic parts for cars.

The Eaton Corp. has cut its work force at a number of Nebraska and Iowa facilities. Recently, it laid off 90 workers in Shenandoah, Iowa, where it makes transmissions. Sixty more were laid off in Kearney, Neb., where valves and gears are made. At the company's Hastings, Neb., plant, which makes parts for axles, 22 people lost their jobs.

Union Pacific Railroad, meanwhile, has seen a 24 percent decline in car loadings for automotive freight in the third quarter of 2008, said company spokesman Mark Davis. Last year, automotive shipments represented 9 percent of the railroad's freight revenue, or $1.46 billion. Of that revenue, nearly 80 percent comes from hauling finished cars.

The Omaha-based railroad has sent letters to the Bush administration and congressional leaders, asking them to help the domestic auto industry, Davis said.

Omaha auto dealer Mickey Anderson of the Performance Automotive Group also is urging lawmakers to help.

"I am absolutely confident that the investment we could make today pales in comparison to the cost of cleaning up after a breakdown of the Big Three," Anderson said.

Efforts to help the automakers could depend on Senate Republicans, who have the ability to block legislation even though they are in the minority.

Sen. Chuck Grassley, R-Iowa, suggested the presidents of the auto companies reduce their salaries to $1 a year, as Chrysler head Lee Iacocca did after the 1980 government rescue of his company. Grassley said the executives, after all, are the ones responsible for their companies' troubles.

Reducing their own pay also would better position top executives to ask autoworker unions for concessions, he said.

Rep. Lee Terry, R-Neb., said that if the money provided includes requirements that the companies change "their old ways that aren't competitive," Congress might be open to helping out.

Terry met Friday with Anderson, the auto dealer, who contends that domestic automakers were hit hard by economic conditions out of their control.

Anderson said U.S. automakers didn't boost fuel prices to $4 per gallon in the past year, causing an abrupt shift in consumers' car-buying patterns. Nor were they responsible for mortgage defaults that led to a credit freeze.

It's true, he said, that companies such as Japanese automaker Toyota were better prepared because they had more fuel-efficient cars to sell. But he said U.S. manufacturers are adapting and just need help to get through "an economic Katrina."

Anderson said it's important to consider how much the auto industry is interwoven in the fabric of Midlands communities. Auto dealers -- particularly those selling cars and trucks for the U.S. companies -- and some manufacturers are key to the economies of smaller cities.

In Cozad, population 4,257, locals are worried that the nation's economic troubles may wash away the Tenneco plant that has been there since 1961.

Earlier this year, the factory laid off some workers because of a strike at a far-off axle manufacturer.

"I don't think there's a person who won't say they're scared by what's going on," said Geiser, the economic development director. "There is a lot of tension in the community right now."

--Contact the writer: 444-1114, paul.goodsell@owh.com

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