Seeking Alpha
Macro, economy, Professor
Profile| Send Message|
( followers)  

General Motors (NYSE:GM) was founded in Flint, Michigan by auto pioneer William Durant, who combined Buick with an assortment of other auto manufacturers and parts suppliers on September 16, 1908. In the next few years, Durant and GM added automakers Oldsmobile, Cadillac, Elmore, and Oakland (later known as Pontiac), along with Reliance Motor Truck Company and the Rapid Motor Vehicle Company (predecessors of GMC Truck).

In forming GM in 1908, "Durant introduced two concepts that define manufacturing today: customer choice and industry consolidation." As GM and the auto industry thrived and expanded in and around Flint, Michigan during the 20th Century, employment opportunities were plentiful, and GM eventually employed close to 85,000 workers in "Vehicle City" by the 1970s.

GM and Flint are now ready to celebrate GM's 100th year anniversary (see picture above) this summer in July with parades, parties, baseball games, paddle boat rides, home tours, car cruises, concerts, new vehicle shows, etc.

What probably won't get celebrated this summer in Flint is this: Almost all of the GM jobs are gone forever. And it's not just the GM jobs that are gone (there are only about 8,500 left and the number is falling), and not just the non-GM automotive jobs, but most of the manufacturing jobs have left Flint forever!

The chart above (click to enlarge) shows the reality of manufacturing job decline in the Flint area (includes Genesee County). As recently as 1990, about 1 in 3 jobs locally were manufacturing (32%), which was about twice the percentage of manufacturing jobs nationally - 16.3%, or about 1 in every 6 jobs. Although manufacturing jobs (as a percentage of total jobs) declined nationally and here locally, the decline in Flint was much more dramatic, so much so that by 2008, fewer than 1 in 13 jobs are now in the Flint area's manufacturing sector (7.8%), which is less than the national average of 9.9% for manufacturing jobs (1 in 10 jobs) by more than two full percentage points!

Flint celebrates GM's 100th year anniversary in the same year that Flint has a smaller manufacturing base than even the rest of the country. In other words, in the same year that Flint celebrates its industrial and manufacturing heritage as the birthplace of General Motors, it celebrates another, equally important historical milestone: Flint's manufacturing sector is dead, and it has now officially become a service-sector economy.

What killed off 75,000 manufacturing jobs in Flint? Although other factors may be relevant as well, economic theory clearly tells us that the more successful unions are at achieving above-market compensation, the greater the likelihood that those unionized industries or companies will eventually suffer losses in market share, employment and output. This is exactly the situation today, with GM's market share, UAW membership and Flint manufacturing employment at all-time lows.

The above-market compensation gains of the UAW led ultimately to long-run losses in union employment in places like Flint, Michigan, as the UAW gradually priced its overpaid members out of the globally competitive labor market.

Automobile production is expanding, but it's expanding elsewhere in the U.S., outside Flint and outside Michigan (see chart below), see Mackinac Center article here.

Source: 100 Years Later: With GM In Decline, Flint is Now a Service Economy