Michigan's survival plan: Find new industries – fast.
Long dependent on auto manufacturing, the state and its cities are bracing for even deeper budget cuts.
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"Mayors are terrified," says Jennifer Granholm, the state's Democratic governor, who has spent most of her six years in office dealing with the state's economic crisis. Governor Granholm faces similar issues with the state budget, where, she says, "We're long beyond just cutting waste."Skip to next paragraph
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The governor recognizes the problems with having her state so dependent on a single industry and has long worked to diversify Michigan's economy, with some success. She's focused on businesses that dovetail with the state's history and strengths, utilizing its machining, tool-and-die, and research and development industries. Granholm sees a future – and has already helped to attract new jobs – in industries like defense manufacturing, alternative energy, and nanotechnology.
At the same time, she's restructured the education system so that every student is on a college-preparatory track, with the goal of doubling the number of college graduates and shifting the state's old paradigm of young people going straight from high school to a factory. Still, the process is a slow one.
"Sometimes leadership is like that old Chinese proverb, planting trees under whose shade you'll never sit," says Granholm.
For now, she is preparing a "rapid response plan" to deal with inevitable layoffs and more economic woes. The state's "No Worker Left Behind" program, for instance, will pay for the tuition of unemployed workers who undergo training in industries like healthcare, where the state has vacancies.
The Big Three employed roughly 250,000 people nationally at the end of last year – many of those jobs in Michigan. But analysts say that layoffs have a particularly drastic effect because each of those jobs are directly connected to so many others in related industries. "Auto has the highest multiplier in manufacturing. A job in an assembly plant might have a multiplier of eight, nine, or 10," says David Cole, chairman of the Center for Automotive Research, referring to the number of jobs that might be lost for each layoff. "The economic impact of jobs lost is going to escalate pretty dramatically."
Most officials are feeling optimistic that the federal government will come through with aid to the car companies, but the plans the companies are proposing this week involve severe job cuts and factory closings. GM, which has said it needs a $4 billion infusion of cash by the end of this month to remain solvent, told Congress on Tuesday that it would cut 20 percent of its workforce, close nine factories, and try to renegotiate contracts with the United Auto Workers Union.