“A great city is that which has the greatest men and women.”– Walt Whitman (1819 – 1892)
A Life of Its Own
In many ways a city is a living entity. It is continually evolving in feature, landscape and character. Changes in the “econo-industrial” landscape of a particular region are not uncommon and when they happen over a long period of time people rarely take notice. If brought on too rapidly however, they can cause a kind of socioeconomic culture shock.
Imagine a tree growing from a sapling over the course of several decades. Passing by the tree on a regular basis, most people wouldn’t pay much attention to it because the changes occur so slowly. Now imagine if that tree were suddenly hit by lightning – forever altering its appearance.
It’s the same tree, but starts growing in different directions. The changes in the tree’s appearance and character stand out more in this case because they happened so quickly.
That’s how a city evolves as well and that is exactly where the Miami Valley is today – evolving. It’s just happening more quickly than people would like and it affects more than just one industry or town.
The Dayton and surrounding regions have been dependent on manufacturing for over a century and have now been thrust into a rapid state of change. Oddly enough, that change did not come as quickly as most people would like to believe.
More than two decades ago Dayton’s largest manufacturing employer, General Motors, was experiencing similar problems to those going on today. In 1989, author Maryann Walker published a book on the subject called, “Rude Awakening – The Rise, Fall and Struggle for Recovery of General Motors.”
With a title that sounds like it could have been printed last week, Walker’s book documents how the auto maker nearly collapsed once before because of a company culture and operating methods that made no adjustment for changing times.
She even refers to GM of the 1980’s as being a microcosm of American industry, a faulty and outdated business model that was copied by subsidiaries and suppliers. “The hard reality of General Motors,” Walker wrote, “is that its original systems have been designed for conditions that no longer exist.”
The company underwent a massive reorganization that began in 1984, but the damage had already been done. Walker wrote, “The bureaucracy and outdated organizational structure had become so strangled that it was virtually impossible to achieve a cooperative working environment.” Since division heads could not agree on the same course of action, most of what was wrong went uncorrected. The company started closing factories in the Dayton area even back then.
Of course, GM is not the only manufacturer to leave. Mead Paper and the printing plant for McCall’s magazine left the city years ago. Standard Register, which develops software for automotive dealers, is now cutting its workforce as well.
In a final blow to the Dayton area, National Cash Register (NCR) has announced after 125 years it is leaving the city altogether. In the early1970’s NCR discharged hundreds of workers when it shut down most of its Dayton factory operations.
Looking back, it is easy to see that companies have closed and people have lost jobs before, but Dayton and its neighboring communities are still here. What makes the current situation so unique and difficult is that entire industries are changing all at once. From Wall Street to Main Street, the recession affects people differently.
Those who own car dealerships, for example, have a unique perspective on the situation. While they may not employ as many people as a factory, thousands of dealer franchise owners are being forced into a spot from which they may never recover.
Not Your Father’s Oldsmobile
Actually, Oldsmobile is gone now, so are Pontiac and many other American-made models. The landscape of the automotive sales market in the Miami Valley has undergone some earth-shaking alterations the past year. Dealerships that have been in business for more than 30 years are now scrambling for survival due to unprecedented decreases in sales and forced closures resulting from the bankruptcies of GM and Chrysler.
Unfortunately, several Dayton area dealerships, including Harmon Cadillac and Salem Chrysler Jeep, made the list of thousands slated for closure by both companies. General Motors has provided a “wind down” period to allow dealerships the opportunity to return stock and close down their businesses in an orderly fashion. Chrysler, however, is doing things differently, as Salem Chrysler Jeep owner Mary Kay Zappia learned during a conference call on May 14 when she was informed hers was one of the dealerships to be closed.
More than 40 years ago, Mel Zappia and his wife Mary Kay, freshly transplanted to the Dayton area from DeMoines, Iowa, set up shop to sell cars. Though Mel has passed on, Mary Kay and their two sons, John and Dan, have carried on the family tradition at the same location – 5010 Salem Avenue.
“They notified us that on the 9th of June that the judge ruled to accept the deletion of 789 dealers throughout the country,” Zappia said, commenting also that she has had to discharge a few workers due to budget cuts. “We have had customers in here with tears in their eyes. Many of them wrote letters to the judge before he ruled on the list of affected dealers.”
With no evidence to the contrary, Zappia strongly believes that the closures were, “arbitrarily chosen by President Obama’s auto industry task force,” rather than having been based on the sales records of the individual dealerships. She is not isolated in her suspicions.
On June 12, the president of Chrysler, James Press, came under fire by members of congress in a special hearing to learn how the company selected the dealerships that were to be closed. Members of the special committee questioned Press alongside GM’s CEO, Fritz Henderson, regarding the methods used to determine which franchises would be terminated.
Congressional leaders like Peter Welch, a Democratic representative from Vermont, argued that the selections were arbitrary with little or no opportunity for appeal. James Press disagreed stating that the selection of dealerships was, “not made by the White House, it was made by our company, Chrysler.” Either way, the result is the same – the closing of thousands of businesses around the country and more unemployed workers.
Zappia noted that regardless of this news, her business is still open for pre-owned vehicle sales and non-warranty repair work for all makes and models. “We are losing the Chrysler franchise,” she said, “but we’ll keep doing what we’re doing until we make a decision where to take things from here.”
The Zappia family is not alone, however, literally thousands of other franchises have yet to shut down and General Motors and Chrysler are not finished yet. Discussions are still going on about more factory and dealer closures, as well as the condition of retiree benefits. Plus, there is still the question of exactly what these companies will look like on the other side of the bankruptcy proceedings now that Uncle Sam is a major stock holder.
Out of the Frying Pan
During the 1980’s GM, Ford and Chrysler were lagging behind import car companies whose market for small, more fuel-efficient cars was growing in America. In Dayton, GM workers had to deal with the frustration of layoffs and call backs on a regular basis in an effort to save money in the short term.
The company would lay off 30 to 40 people at once and then call them back to work some time later. Workers had no idea when a layoff would occur and when it finally came, all they could do was wait. Journeyman machine repairman and builder Marty Walling got tired of waiting.
Walling started out as an apprentice at the Inland Division of General Motors in 1977. In the 1980’s he was doing well, but experiencing consistent layoffs.
“I got tired of the layoffs after the third time,” Walling said. “I had always dabbled in building and construction, so I left GM in 1982 and went to work for a builder in Beavercreek who was putting up a 126-unit condo development.”
“We were the new product in town so we were only building two or three units for the first couple of years,” Walling said. “But then it got to the point where we couldn’t build them fast enough and we finally ran out of land.” The company then purchased other property for development and did some commercial construction.
“Builders got lackadaisical because anything we wrote at the time we got a contract on, which was probably because of how money came so easily,” Walling recalled. “Anyone could get a mortgage for anything back then. They were making loans on the hoods of cars.” But that wave would die out soon enough for many in the business.
According to the U.S. Department of Housing and Urban Development, in May of this year 491,000 new single-family homes were completed, a 9.4 percent drop from April. Walling may have escaped the final collapse of General Motors, but is he worse off now as a home builder? He doesn’t think so.
Most builders agree that the higher end market ($350,000 and up) is still selling, albeit not as it was before. “Today our company’s target market is the empty-nester,” Walling said, “with prices ranging anywhere from $170,000 to around $200,000, and 80 to 90 percent are cash buyers.”
Realtors insist it is a buyers’ market, but it is still harder to get a mortgage than it was three years ago and that creates a problem for the empty-nester looking to trade up. “Even though these people can get a mortgage, someone in that stage in their life is not willing to do that if they can’t get a buyer for their current home.”
One thing obviously affects the other, but the hope is that as more securely-based mortgages are written, the system will stabilize itself. At least that’s the idea. Buying power is not just a limitation of home sales, however. It also affects local retailers.
Retail Space Available
It is common knowledge that retail sales have fallen substantially over the last couple of years. Cable TV news programs are loaded with stories about the latest retailer to go out of business or file bankruptcy, the most recent being Eddie Bauer.
It only stands to reason, after all, that when times get tough, people spend less – right? Not necessarily, according to Pamela Cochran, property manager at Town & Country Shopping Center in Kettering. “People are spending their money more wisely and Kettering is very loyal,” Cochran said.
Opened in 1951, Town & Country has the reputation of being the first shopping center, even among those in the industry. Cochran has been the property manager for the last 16 years. “Town & Country is operated by the third generation of the family that started it,” Cochran said. “It’s in an excellent location, in what is considered to be Kettering’s downtown area.”
“We have 41 tenants right now, about 75% of our capacity,” she added, “with two pending sales.” Walking through Town & Country, however, shoppers may notice a number of unoccupied shops, but not for the reasons one might think.
About every 10 years, the owners of the facility make changes to the building to update it wherever possible. This year, they had planned to remove the front of the building and make Town & Country an open-air shopping center. Two issues prevented the renovations and the economy came in second.
The number one reason for scrapping the project came from the community. “Our owners asked the community to tell us what they thought of the change and they asked us to keep it just like it is.” That’s exactly what they intend to do, which actually worked in their favor, financially.
As the economy continued to dip, it made more sense to do some upgrades, rather than spend a great deal of money on changes that the buying public did not want. But, anticipating that the owners were going through with the open-air plan, some tenants chose to move or expand elsewhere, leaving behind empty stores.
People stop spending when they have nowhere to spend or when they have no job to provide them with the money to do so. With large-scale employers leaving or reducing their workforce, municipal governments are seeing a loss that goes beyond retail sales figures.
Dayton Mayor Rhine McLin agrees that more must be done to retain the businesses and jobs already. “Our biggest loss is from income taxes,” McLin said.
“In Ohio, the major revenue stream for municipalities comes from the income tax of those who work there.” When General Motors and NCR left the area, Dayton lost $2.5 million in income tax revenue.
It Is All Academic
What happens when the recession hits someone who has yet to begin a career? The Class of 2009 will certainly have a challenge as they go out into the workforce.
Dr. Jeannette Davy is a professor of business management at Wright State University’s Raj Soin College of Business. She believes that creativity will be the secret of their success. “Graduates will need to be more creative in packaging themselves when applying for the jobs that do exist and are being created,” Davy said. “While new graduates don’t have the experience in most cases, they have an advantage in that they may be cheaper to hire.”
The problem comes when people who have been without jobs for months or are now faced with long stretches of unemployment are willing to take jobs at lower pay. “Fewer of the high paying jobs in traditional industries exist,” Davy remarked. “New graduates are competing with people with much more experience who have lost their jobs.
Davy continued, “In order to find jobs, more and more of our graduates will have to leave the area. This will further contribute to the brain drain Ohio is experiencing.” That means graduates who want to stay in the area must be willing to make concessions – like slightly lower salaries or reduced benefits – which creates its own paradox. In order to entice a new graduate to stay in Dayton, employers would have to do just the opposite by offering better money and benefits that their competition.
To give graduates somewhere to work, city governments are trying to convince businesses to stay in the Dayton area, and even lure in some new ones. “The way we’re going to get out of this is one job at a time,” said Dayton Mayor McLin.
She and other Miami Valley leaders are working to provide resources and support to small, high-tech startups. In theory, several smaller companies mean less risk to the overall economy than a few large employers – especially if some of them should fail. But there is still much to be done.
Is it tough out there? Yes, but it will get better. Are we there yet? Not quite. The Miami Valley still has a good bit of growing to do. Think of these changes not as “recovery,” but as growth or evolution.
It’s just the next step in the life of the historic Gem City and all of her neighbors who depend on each other. In the end, it will be the actions of the people, not the wavering economy, that determine the overall effects of a difficult situation.
So, where do we go from here? Find out in Part III of our series, “Economic Transition in the Miami Valley.”