Chrysler bankruptcy rattles an auto industry town

K.O. Jackson
CNHI News Service

KOKOMO, Ind. May 04, 2009 05:43 pm

— William Stagg threw up his arms a little before noon last Thursday and walked slowly to his car in United Auto Workers Local 685’s parking lot.

A slight rain didn't concern him. The Chrystler retiree was more worried about what would happen to his pension and retirement benefits.

“I came here to find out, but no one is telling me nothing,” said Stagg, who retired in 2001 after 35 years at Chrysler.

“I want to know about my pension. Will I be able to keep it? That’s all I am concerned about. Will I keep my insurance? This makes me feel apprehensive.”

Such questions permeate the conversation in Kokomo since the nation's third-largest automaker filed for bankruptcy last Thursday. Kokomo is home to four Chrysler plants and an estimated 4,600 hourly Chrysler employees.

As of today, the automaker has idled most of its factories, pending the outcome of a bankruptcy expected to last two months. Chrysler is negotiating to sell assets to a partnership of Italian car maker Fiat and the United Auto Workers. The U.S. and Canadian governments have pledged to underwrite the deal with $4.5 billion in loans.

As part of the deal, Chrysler plans to close eight factories and sell machinery to help pay creditors. The value is expected to be as much as $2.3 billion.

None of Kokomo's plants are on the closure list. But UAW Local 685 president Rich Boruff said they will feel the impact.

“We may be safer and in a better position because we make transmissions, but one way or another, we will feel the impact," Boruff said. "Some time or another, we will feel it. We may be downsized, you never know. ...

“It’s bad all the way around," he said. "Only thing we can do is to stay as positive as we can, but it is bad right now.”

Until last week, Chrysler was negotiating with unions toward a long-term plan it owed the Obama administration. Union members agreed to multiple concessions including wage freezes through 2011, removing limits on how many workers are hired at less than $15 an hour and shrinking the company's obligation to the UAQ's retiree health care fund.

Ozina Archer works at a convenience store down the street from Local 685. The store saw extra traffic after Chrysler workers met to vote on the concessions package Wednesday.

While most customers come from the nearby neighborhood, Archer said losing Chrysler employees “hurts all businesses in Kokomo.”

Local government also shares the pain. The automaker owes $8.3 million in local property taxes, though county officials say they are optimistic it will pay.

Indiana University Law School professor Dennis Long doesn’t expect Chrysler to quickly rise from bankruptcy. The case will have good and bad, he said, depending upon your perspective.

“I think it will be September or October before this ends," said Long, who lectures in commercial and bankruptcy law. "What is good for one party in this case will be bad for another. Chrysler can shed its unprofitable assets and take necessary steps to go forward to being a successful new Chrysler; pay their employees wages and keep the Kokomo economy thriving. But the shareholders lose everything. They will come out of this without anything to show.

Long said the worst outcome would find Chrysler with no alternative but to liquidate, pay its creditors and close.

Dustin Sheline is hopeful for a more positive ending.

Sheline has seen his share of ups and downs lately. His first baby, Ryder, was born in November. He was laid off from Chrysler's Kokomo Transmission Plant the following month.

“I would love to go back to work. I have my Chrysler sub pay and unemployment," he said during a visit to Local 685 on Friday afternoon. "Going into bankruptcy, the assets are frozen, and I am very concerned I won’t get my sub pay. Then my pay will be cut in half.

“My wife doesn’t work. I am the sole provider. But the blessing in disguise is the time I get to spend at home with my baby and wife. At this point in time, it is a blessing to be laid off.

“It is what it is. I think the union could have given them everything, and it would not have made a difference. We’ll just have to wait and see and hope for the best.”

For Kokomo, much hangs in the balance. The city of about 46,000 people just 50 miles north of Indianapolis is heavily dependent on the auto industry. Chrysler and autoparts manufactuer Delphi are responsible for 20 percent of the city's employment, by some estimates.

Ken Kirby, 63, who retired from Chrysler after 31 years, is concerned about that large population of Chrysler workers and retirees. He said he hopes Kokomo won't begin to resemble his hometown,

“Who knows what the impact of this is going to be? It happened so quick,” he said, snapping his fingers. “I dread what could happen. I grew up in a small Pennsylvania mining town. When the mine closed in 1959, the population went from 5,000 to 300 that quick.

"This is even affecting Little League and softball teams," he said. "This is the first time in 35 years we’ve had a hard time finding sponsors. People can’t afford it.

Shawn Fain, of UAW Local 116 and a member of the UAW's national negotiating committee for Chrysler, said the carmaker's future really depends on the broader economy.

"That is what it is going to take for us to come out of this," he said. "The economy has to get better and people have to go buy cars."

K.O. Jackson writes for The Kokomo (Ind.) Tribune.

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