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When towns lose a factory, what comes next?

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The GM shutdown in Lordstown, Ohio, underlines why we need a coordinated, national program to help communities disrupted by economic shifts

GM said it would end production at five North American plants including Lordstown, Ohio and cut 15 percent of its salaried workforce. The GM Lordstown Plant assembles the Chevy Cruze.
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GM’s decision to stop producing cars at the Lordstown, Ohio, factory isn’t the first time that a U.S. city has felt decimated by a factory closing or relocation. It’s been happening for decades.

Lordstown underlines that, despite an understanding about how these events can damage a community, there still isn’t a robust action plan, especially at the federal level.

“The United States has an immature array of responses,” says Mark Muro, senior fellow at the Brookings Institution’s Metropolitan Policy Program. “These kind of closing are viewed as a one-off exception to the rule of prosperity. They’re seen as bugs, and not as a feature.”

Coming on the heels of Amazon’s HQ2 decision, the GM plan to idle plants can be seen as a story from the other side of the diverging U.S. economy. The economy continues to cluster around big urban areas while rural and heartland regions, which grew up around manufacturing sectors, suffer from diminishing opportunities as these industries shed jobs.

“We have a great product, but we have it at the wrong time,” Lordstown Mayor Arno Hill told CNN Business.

But it doesn’t have to be that way. Can the country, as a whole, do a better job of helping former factory towns bounce back?

Republic Iron & Steel Company, Youngstown Works,
Library of Congress

After an economic body blow, a campaign to “Drive It Home”

In and around Lordstown, city and regional leaders are busy figuring out the next chapter. According to James Dignan, president and CEO of the Youngstown/Warren Regional Chamber, the local economic development agency, the region already has ideas on how to start bouncing back and bring in more businesses and jobs.

Lordstown and the surrounding Mahoning Valley in northeast Ohio has been through tough situations before. The infamous Black Monday of 1977, when a steel plant in nearby Youngstown shut down and thousands of people lost their jobs, was devastating.

This week’s news is also a “body blow,” Dignan says. Not only will 1,600 plant workers lose jobs, thousands of additional job losses will happen at automobile-related warehouses and logistics companies, and the loss of income and spending will start a domino effect that will hurt local stores and restaurants.

“There will be a huge impact with all the lost positions,” he says. “It’s not a complete disaster, but it’s something we need to direct a lot of attention to.”

Like other local leaders, Dignan was very disappointed in GM’s business decision, which will halt production at the factory in March (the plant isn’t shutdown, but “unallocated,” meaning there aren’t plans to product anything). But it didn’t come as a complete surprise. Sales of the Cruze sedan, the model made at the Lordstown plant, have declined for years, and shifts at the factory had gradually been cut over the last few years, from three a day to just one.

Dignan and others see the region’s manufacturing experience as its main selling point. While economic development groups plan to unveil a larger action plan on Friday, weeks before the official GM decision, local groups had launched the “Drive It Home” campaign.

While the auto market is turning towards SUVs and pickups, there’s still a demand for electric vehicles; why can’t Lordstown, and the 6.2 million-square-foot plant, make the next generation of energy-efficient cars? The region boasts a trained workforce, excess manufacturing capacity, as well as local institutions for innovation such as the American Manufacturing Center in Youngstown and the Tech Belt Energy Innovation Center, a local tech and energy incubator.

The Drive It Home campaign echoes the successful Bring It Home campaign of 1998, a community response to a previous threat of plant closure (both campaigns held launch events in the same union hall).

The difference between campaigns, Dignan says, and a source for more optimism, is that today, the Lordstown area has a more diversified economy. In response to decades of economic shifts, the area has focused on supporting nimbler manufacturing firms, looking to attract an array of smaller companies. Other small cities across the country have turned to public-private partnerships and local investments to attempt to kickstart local businesses.

That’s why the strategy going forward is more about rebranding—not totally rethinking— what the Mahoning Valley is all about.

“The post-industrial Midwest won’t get those massive factories back,” Dignan says. “But we can diversify, and get a lot of smaller, 25 to 30 person companies to come to town.”

Lacking a unified plan of action

Lordstown won’t be on its own. JobsOhio, the statewide economic organization, will help, and the region will apply for select federal grants. Ohio politicians, including U.S. Rep. Tim Ryan, Sen. Sherrod Brown, and Gov. John Kasich, have pledged to support local workers. Brown expressed outrage that GM, which was bailed out by taxpayers and benefited from recent tax cuts, would turn around and cut jobs as part of a plan billed as a “transformation for the future.”

But a robust federal response, a readymade toolbox to help regions readjust and recover from these kind of economic shocks, is lacking. President Trump’s immediate reaction, including tweeting about tariffs, addresses larger economic forces and policy debates, not the everyday issues soon to be faced be these communities.

According to Muro, the pre-globalism, postwar economic boom, as well as the ability to more easily move around the country, meant that the U.S. as a whole didn’t really think about how to rebuild communities hit by closings and industrial shifts until the ’90s, says Muro. As problems from globalization, offshoring, and so on began to worsen, the flaws of badly designed programs—or the gaps from non-existent ones—became more evident. For instance, the country’s lack of a more well-defined, robust safety net makes it harder to switch jobs and chase opportunity.

“We really have been late in seeing that these programs are prerequisites to maintaining competitiveness and social consensus around the innovation economy,” says Muro.

There is federal support, but for the most part, it’s just very limited, or not well coordinated. For instance, the decades-old Trade Adjustment Assistance program, designed to retrain and re-skill displaced workers, is considered small and has had limited success. Repeated studies have found that it hasn’t been effective, according to Brookings research, and one study found most trade-displaced workers end up relying on Social Security programs and disability benefits as opposed to the TAA.

Moving from paralysis to problem-solving

Muro says the government needs to focus more on re-skilling and building up regional economies. The Obama administration had introduced a series of advanced manufacturing centers across the nation, to try and catalyze the development of new industries, but that program has largely been set aside during the current administration.

In a new report, “Countering the geography of discontent: Strategies for left-behind places,” Muro and his co-authors discuss proposals that could help ease dislocation and displacement while boosting the economic fortunes of areas like Lordstown. Increasing digital skills, investing in broadband, and helping provide capital for new small businesses, part of a slate of “place-sensitive distributed development” strategies, could form the backbone of a new federal response.

It’s not like the the federal government has no experience with this kind of issue. The government actually has a very robust program, called the Defense Industry Adjustment Program, to help communities recover from military base closings that’s proven to be successful.

The effort, which helps communities re-envision a new economy, offers a comprehensive toolkit, helps them plan a new future, and has produced significant results. Due to this program, according to a 2013 report by the Government Accountability Office, a slight majorities of communities impacted by base closings demonstrated better economic performance than the national average.

While shifts in globalization and manufacturing have already caused significant economic displacement, upcoming changes in tech will likely be an even bigger driver of growth and disruption going forward. A coming age of even more clustering and rapid-fire economic changes, as well as transitions toward renewable energy, only underscores the need for a national strategy to help communities bounce back and prosper.

“We’re certainly not saying this is an easily solved problem,” says Muro. “It’s an enormous problem at this point. But we need to move out of this paralysis, and the idea that we have no idea what could work, given the daunting nature of the problem.”