Extreme Poverty / Is This Michgan or the Third (turd) World

Thousands more in West Michigan hit 'extreme poverty' as state woes continue
by Ted Roelofs The Grand Rapids Press

Michigan was the only state where poverty rose and incomes fell last year, the U.S. Census Bureau reported Tuesday.
More people in West Michigan are bottoming out.
The U.S. Census Bureau shows the number of Grand Rapids residents in extreme poverty -- at $10,325 or less for a family of four and half the federal poverty line -- climbed from 13,957 in 2000 to 22,497 in 2007, a 65 percent increase. That number represents 12.3 percent of the city's population.

In Kent County, 78,198 people were in poverty in 2007, or 13.2 percent, compared to 49,832 in 2000, or 8.9 percent. The number in extreme poverty jumped from 22,061 in 2000 to 36,597.
Chico Daniels, president and CEO of Mel Trotter Ministries, sees this bleak reality each day at the Grand Rapids shelter for homeless men and families.
Some come because of substance abuse. But others are simply out of money, out of work and have no place to stay.

"With the highest unemployment rate in the nation, I'm not surprised. Some of these are people who counted on those assembly-line jobs," Daniels said of Michigan's economy. "They staked their entire future on the auto industry. The decline of the auto industry has sent shock waves through the entire community."

Year to date, the shelter has taken in 3,889 women, up 35 percent from the same period in 2007. The number of children in the shelter is up nearly 20 percent.

"I think poverty doesn't go on vacation," Daniels said.
"Poverty tends to hit women and children hardest. My definition of poverty is a lack of options. People come to Mel Trotter because they are out of options."
In Wyoming, the poverty rate declined slightly, from 14.3 percent in 2006 to 12.2 percent in 2007. But those in extreme poverty increased from 2,594 in 2006 to 4,339 in 2007, a 67 percent rise.

While the overall poverty rate in Ottawa County was about half that of Kent County, at 6.8 percent, those in poverty climbed more than 5,000 from 2006 to 2007, to 16,909.
The number in extreme poverty reached 7,176, nearly double the number in 2006.
Michigan's rate of extreme poverty jumped from 6 percent in 2006 to 6.5 percent last year. Eight years ago, the rate was 4.8 percent. The number of people in poverty increased by 45,000 during 2006-07.

The child poverty rate increased from 17.8 percent to 19 percent between 2006-07, while the national rate stood at 17.6 percent.
Amy Rynell, director of the Chicago-based Heartland Alliance Mid-American Institute on Poverty, said Michigan continues to lead even the hard-hit Midwest in bad news. Its poverty rate stood at 14 percent in 2007, up from 13.5 percent the year before -- and a full percentage point above the national rate, which was virtually unchanged during the same period.

"Michigan, relative to the nation, appears to be doing the worst. The only state in the nation where poverty actually increased was Michigan."
Rynell said the rising number of those in extreme poverty is sobering.

"These are people who are spreading out their food so they are only eating once a day. They are people who are living in houses that are unsuitable for living.
"These are really dire conditions where people are making decisions that are really untenable."
Beyond the layoffs and plant closings that have rocked the Midwest in recent years, Rynell said, states such as Michigan are paying the price for social service cutbacks.

Four Michigan cities -- Kalamazoo, Flint, Pontiac and Detroit -- were among the 20 poorest in the nation. "We have seen over the last decade a whittling away of our safety net. The programs that were in place to help people in economic downturns have been whittling away."

The news is little better for middle-class households.
Median incomes in West Michigan remain sharply down from 2000, declining in Kent County from $57,217 in 2000 to $49,354 in 2007. In Ottawa County, income dropped from $65,140 in 2000 to $53,881 in 2007.
The 2007 median income in Michigan was $47,950, down 1.2 percent or $596 from the 2006 median of $48,546. The state's nationwide ranking slid from 24th to 27th.

Locally, there was one ray of hope in the Census report released Tuesday. Median income in Grand Rapids climbed to $38,272 in 2007, from $35,676 in 2006.

In another report released Tuesday, the Census Bureau said 11 percent of Michigan residents had no health insurance coverage in 2007 -- up from 10.4 percent in 2006 and 9.1 percent at the beginning of the decade.

West Michigan / Suppliers Can't Win

DETROIT -- Chrysler purchasing honcho John Campi says his hard-nosed style of supplier relations — which critics say amounts to using the courts to bring companies to heel — is paying off handsomely.
Campi says he'll stick with the strategy. This month Chrysler LLC hauled one of its biggest suppliers into court to resolve a dispute that in the past would have been settled with backroom diplomacy. It is the second time that has happened this year. And Chrysler forced another supplier into bankruptcy instead of helping bail it out.
Why risk bad blood with crucial partners at such a difficult time? Suppliers say a weakened Chrysler has less clout when it comes to making parts makers bend to its will. Disputes are more apt to end up in court.
Indeed, surveys show that Chrysler's supplier relations have deteriorated this year, and a growing number of suppliers aren't sure they want to continue selling parts to the company.
But the strategy also reflects a tough-minded purchasing boss in Campi, an automotive outsider with a decisive style and scant regard for deep-rooted industry traditions.
When troubled Plastech Engineered Products Inc. quietly asked Chrysler and other automaker customers for a third bailout in February, Campi canceled purchase orders and tried to retrieve Chrysler's plastic-making tools.
Ham-Handed?
Suppliers called the reaction excessive, even ham-handed. Plastech rushed into Chapter 11 bankruptcy protection to keep Chrysler's tools and briefly withheld some shipments of plastic parts bound for Chrysler.
But today, Campi says his handling of the Plastech case has been vindicated. He says Chrysler's actions enabled the automaker to pay a fraction of what a bailout of the supplier would have cost.
According to court documents in the Plastech bankruptcy case, Chrysler was looking at a bailout tab of between $60 million and $100 million.
Plastech, with sales last year of $1.4 billion, was busted up and sold off in Chapter 11 this summer.
"I'm not looking to kill suppliers," Campi said after a speech at the Management Briefing Seminars in Traverse City, Mich. "I will work with every supplier I can in a collaborative fashion to help them become profitable and help us.
"But we don't have the wherewithal to prop up a supplier simply to keep them running. I won't do it."
The blunt-talking Campi is playing out supplier disputes in a very public way. Since January, Chrysler has sued two of its largest suppliers over disputes that almost certainly would have been resolved quietly in years past.
This month, Chrysler sued Johnson Controls Inc. for what it says were $15 million in overcharges for materials used in batteries. With a $40 billion annual purchasing budget, that is barely a rounding error at Chrysler.
'It's Hardball'
Yet, Chrysler is publicly taking to task the company that makes seats and interiors for some of its most important models, including the Jeep Grand Cherokee and the redesigned 2009 Dodge Ram pickup. In a court response, Johnson Controls denied the allegations.
In February, Chrysler sued Magna International Inc. over seat recalls that occurred in 2005, two years before Cerberus Capital Management LP acquired a controlling stake in Chrysler.
As Chrysler's largest single supplier, Magna sold $3.33 billion in parts to the automaker in 2007.
Industry analyst Dave Cole says Chrysler is under so much financial pressure from Cerberus that it is willing to risk bad blood with even key suppliers to maintain liquidity.
"It's hardball," says Cole, head of the Center for Automotive Research in Ann Arbor, Mich. "We're in an era where you might have to take some risks that you normally wouldn't want to take."
Chrysler's lawsuits reflect an unrelenting quest for cash, says Fred Smith, an attorney with Warner Norcross & Judd LLP.
Two of Smith's supplier clients have sought help fending off warranty claims from Chrysler. Smith says it is nearly impossible to determine who is at fault in the cases. But Chrysler's position, he says, is " 'we don't care who is at fault, you will contribute; give us money if you want to maintain a parts relationship.' "
Too Costly
A third client is dealing with demands by Chrysler for money back over an engine project for which the automaker thought it paid too much.
Smith did not identify the clients.
Chrysler says it is simply trying to protect its commercial interests.
"Sometimes litigation is a logical course to resolve issues that cannot be resolved in the normal course of business," said Chrysler spokesman Michael Palese.
Chrysler declined to discuss details about how much the automaker saved by not helping bail out Plastech.
But Cole, who sat on an advisory board at Plastech, says the supplier's other customers leaned toward helping the company get through a cash crunch.
But when Chrysler refused to participate, that made it too expensive for those customers to shoulder the full cost, he says.
In the Plastech bankruptcy documents, Chrysler said its response was influenced by the accommodations it had made for Collins & Aikman Corp. after the supplier collapsed into bankruptcy protection in May 2005.
The cost to customers for keeping Collins & Aikman afloat until the autumn of 2007 was more than $700 million, according to an Automotive News estimate compiled from court documents and interviews. Chrysler shouldered the biggest share among automakers of the loans and price increases that were never recovered.
Don't Push Us
Campi, a trusted longtime lieutenant of Chrysler CEO Bob Nardelli who moved into his job in January, says he is trying to improve Chrysler's battered supplier relations. In Traverse City, he said Chrysler and its suppliers would need a "fierce collaboration" to slash $1,000 per vehicle in material costs within three years.
But he pledged "equally shared benefits" and promised Chrysler's procurement office would stabilize scheduling, reduce complexity and streamline change notices to make suppliers' tasks easier.
But in an interview minutes later, Campi warned suppliers not to demand faster payment for parts.
"If a supplier wants to push us because of their fear, then they are violating the contract in place, and I will take the necessary action," he told Automotive News.
He acknowledged some suppliers had threatened to stop delivery of parts to Chrysler.
"And I say, I'm not going to let you shut down production," Campi said. "If you're serious about this, you have to live with the legal consequences."

Michigan Economic Development Corp

GRAND RAPIDS, Mich. (WOOD) - The first comprehensive examination of small business lending practices confirms that small business owners are frustrated and gloomy.
Specifically, the Michigan Economic Development Corporation study shows the owners are frustrated with bank lending practices and think the business climate in the state is bad for them.
But the study, conducted by two independent firms, shows small business loans in the state are actually at an appropriate level compared to other states, and that banks do appear to aggressively pursue and make those loans.
Traditional banks are not as likely to make loans to emerging industries like life sciences, though. The study suggest the state needs more niche banks and risk capital institutions.

Why are we Surprised?

Study finds young talent shuns Michigan

by Rick Haglund Column Detroit Bureau
Saturday August 09, 2008, 6:07 AM

DETROIT -- Michigan's three largest metropolitan areas -- Detroit, Grand Rapids and Lansing -- significantly lag behind the Midwest's most vibrant metro areas in attracting college-educated young professionals, a new study shows.
The Detroit, Grand Rapids and Lansing regions have populations about 50 percent less concentrated in young professionals than those in Chicago, Minneapolis and Madison, Wis., according to a study released Friday by Ann Arbor-based Michigan Future Inc.
Those statistics are troubling at a time when state and local governments and economic development agencies are working to attract highly educated young workers to replace retiring baby boomers and reinvigorate sagging economies.
"Where mobile young talent chooses to live is going to be a very powerful driver of how well your economy does in the future," Michigan Future President Lou Glazer said.
The study found many young college graduates choose where they want to live first and then look for a job. Those who leave Michigan are unlikely to return, Glazer said.
With the exception of Grand Rapids, there also are dramatically lower percentages of young professionals living in the three Michigan core cities than in the cities of Chicago, Minneapolis and Madison, according to the study.
In the study, Detroit was compared to Chicago, Grand Rapids to Minneapolis and Michigan's state capital of Lansing and neighboring East Lansing to Wisconsin's state capital of Madison. East Lansing is home to Michigan State University and Madison is home to the University of Wisconsin.
Metro areas and states with a high percentage of college-educated residents tend to have higher per-capita incomes than those with a lower percentage of college graduates, according to Michigan Future.
But Detroit's high-profile problems aren't exactly making it a hot spot for top young talent, including the ongoing matters involving Mayor Kwame Kilpatrick.
He faces felony perjury charges stemming from a text-messaging scandal. Michigan Attorney General Mike Cox on Friday announced filing two felony assault charges against Kilpatrick over an altercation with a sheriff's detective for serving a subpoena in connection with the perjury case.
"The whole thing is spiraling out of control," Oakland County Executive L. Brooks Patterson said of Kilpatrick.
Detroit and Flint this week were named to Forbes magazine's list of the nation's 10 "fastest-dying cities" because of their declining populations, high unemployment and anemic economic growth.
Grand Rapids, meanwhile, presents a more hopeful picture.
There are 10,025 young professional households in the city, 14.6 percent of all such households in the metro area, according to the study. By comparison, Minneapolis has 42,979 young professional households, or 16 percent of professional households in its metro area.
Grand Rapids is becoming a magnet for the health care, higher education and entertainment sectors, making it more attractive for talented young residents.
"More than any other region in Michigan, it's the one that understands downtown really matters," Glazer said. "They've paid more attention to that than any other place in Michigan."
Sarah Lamb, a 28-year-old events coordinator at the Van Andel Institute in Grand Rapids, formerly lived and worked in downtown Chicago. She moved to Grand Rapids two years ago with her husband.
She has found Grand Rapids small enough to easily get established in organizations and her Southeast Side neighborhood, but large enough she hasn't been able to try all the restaurants.
"I like it so much I'm not leaving," said Lamb, a member of the Grand Rapids Young Professionals organization.
"I've never lived in a place where people care so much about the city and try to make it better."
In the larger metro area, Grand Rapids significantly lags Minneapolis in the percentage of young professionals. In metropolitan Minneapolis, including St. Paul, young professionals make up 21.3 percent of all households. In Grand Rapids, including Wyoming and Kentwood, 14.1 percent of all households are populated by young professionals.
The Michigan Future study used demographic data from Claritas, a private target marketing firm.
Glazer and others who examine where young professionals want to live say they desire high-density housing, bustling neighborhoods, lots of entertainment opportunities and communities that are walkable and safe.
Building more vibrant cities and metropolitan areas could boost the entire state because they likely would attract wealthy tourists and retirees to northern Michigan and other parts of the state, Glazer said.
"It's really important that the big metros work," he said.

Betting the Future on it!

Chrysler's future cloudy after year with Cerberus

DETROIT -- After running Chrysler LLC for a year, Cerberus Capital Management LP must be wondering if its mascot, the three-headed dog that guards the gates of hell, is protecting it from the underworld or leading it into the flames.
Since the private equity firm bought 80.1 percent of Chrysler from the former DaimlerChrysler AG one year ago this week, little has gone right. Gasoline spiked to $4 per gallon, driving people away from the trucks and sport utility vehicles that dominate Chrysler's lineup. Consumers were spooked by a weak economy, the U.S. housing market went belly-up, and credit markets tightened, limiting Chrysler's ability to borrow. U.S. auto sales are down 11 percent this year and aren't expected to improve soon.
"Their timing is horrendous," said Gerald Meyers, a former chairman of American Motors Corp. who now teaches leadership at the University of Michigan. "They couldn't have picked a worse time to get into the automobile business domestically."
The troubles are mounting. Chrysler's sales are down 23 percent so far this year, the worst drop of any major automaker, and it has stopped offering leases through its financial arm because of falling truck and SUV values.
At the same time, Chrysler Financial only renewed $24 billion of its $30 billion in credit lines, which will hurt Chrysler's ability to provide loans to buyers and dealers. Fitch Ratings has downgraded Chrysler further into junk territory, saying it expects the company's finances to fall to the minimum levels required to fund its operations as early as next year.
Chrysler puts a positive spin on the headlines. The maker of Town and Country minivans, Dodge Ram pickups and Jeep Wranglers would not make any executives available for this story, but in a conference call to announce July sales last week, Vice Chairman and President Jim Press said a company should be judged by how it performs when times are tough.
"The strongest steel comes from the hottest fire, and while this is like dancing on the sun, we're making significant improvements in our business," said Press, who was lured from Toyota Motor Corp. to lead Chrysler's marketing.
Last fall, Chrysler negotiated a new contract with the United Auto Workers union that's expected to save billions in retiree health care costs and manufacturing wages. It has announced partnerships with Asian automakers that could help expand its small-car lineup and its global reach _ something Chrysler desperately needs since it relies on trucks, SUVs and crossovers for nearly three-quarters of its sales. And it recently tied with industry leader Toyota for North American manufacturing productivity, according to the influential Harbour Report.
The Auburn Hills, Mich.-based automaker says it's performing ahead of its own expectations, with $11.7 billion in cash on hand at the end of June and earnings of $1.1 billion in the first half of the year before interest, taxes, depreciation and amortization. That means it is making money from its core business of making and selling cars, but before financial obligations like paying taxes, servicing debt, deducting the value of aging assets and recording expenses that are taken over time.
As a privately held company, Chrysler isn't required to release financial information, and it didn't provide its net income or other details. Daimler AG, which owns the remaining 19.9 percent of Chrysler, indicated through its own financial results last month that Chrysler lost an estimated $510 million in the first quarter.
Chrysler cites significant job cuts and asset sales as some of the reasons it is exceeding its targets _ it has announced plans to cut 29,000 hourly, salaried and temporary jobs over the last 18 months. But JPMorgan auto analyst Himanshu Patel estimates that Chrysler will burn through nearly $4 billion this year.
The tumult has led to rampant speculation about what's ahead.
Aaron Bragman, an auto analyst with the consulting company Global Insight, said Chrysler may be releasing financial information to make it look healthier to potential bidders. Other analysts have suggested Chrysler Financial's exit from leasing is aimed at making the unit more attractive to buyers.
Even if a sale isn't on the horizon, Bragman said, Chrysler has so few products in its pipeline that it's hard to see a turnaround plan besides relying on partnerships to add small cars to its lineup.
Chrysler spokesman Rick Deneau said the automaker is introducing six products this year. None, however, is a smaller, more fuel-efficient car like buyers have been demanding, although two are hybrid SUVs. By comparison, 18 of the 19 new vehicles General Motors Corp. says are coming by 2010 are cars or crossovers.
It's harder for Chrysler to justify the expense of developing new products, Bragman said, because its market is so limited to North America, so it can't sell as many. Sixty-five percent of GM's sales come from outside North America, while just 9 percent of Chrysler's do.
Meyers suspects Cerberus will eventually sell pieces of the company to get some of its cash back, perhaps to a Chinese automaker eager to enter the U.S. market. For its stake in Chrysler, Cerberus agreed to invest $6.1 billion in the automaker and its financing arm and to pay Daimler $1.4 billion.
"The impatient money has become even more impatient, and Cerberus is an impatient money company. How long can they tolerate negative cash flow?" Meyers said. "I wish I could be more optimistic, but I don't see any daylight here."
Chrysler has denied a sell-off is in the works. In June, Chrysler Chairman and CEO Bob Nardelli, who was brought in by Cerberus after a controversial stint at Home Depot Inc., said he expects Chrysler will still be an independent company three years from now, and that Cerberus isn't second-guessing its investment.
Louis Lataif, dean of the school of management at Boston University and a former Ford Motor Co. executive, said he believes Cerberus can be more patient than a public company, which has large institutional shareholders that demand a quick return on their investment.
"I doubt seriously as an outsider that they were planning a quick spin here," he said.
At the very least, Bragman said, it's probably better that Chrysler is in the hands of Cerberus and not Daimler, which has problems of its own as European sales slide. The German company likely would have faced significant pressure from shareholders to kill Chrysler's brands or dump them for even less than Cerberus paid. Daimler paid $36 billion for Chrysler in 1998.
"It may be that they sold Chrysler as possibly the best moment they could for their own health," Bragman said.
Kevin Beltz, the owner of a Dodge dealership in Indianapolis, blames Daimler for the poor model lineup that was approved during the companies' rocky marriage. He praised Chrysler's new attention to the nuts and bolts, like improving the cheap image in the cars' interiors.
Beltz said he wants Chrysler to focus on its status as an innovator _ the inventor of the minivan and stylish products like the Chrysler 300 sedan. And he's confident Cerberus has the team in place to do that.
"I'm betting my future on it," he said.

OOOH that hurts

NEW YORK -- Standard & Poor's Ratings Services says it cut its ratings for General Motors, Ford Motor and Chrysler further into junk status.

S&P cited the automakers' mounting cash losses and the deteriorating U.S. auto market as the reasons for the moves. All have been cut to "B-" from "B."

Another Quality Company Bites the Dust

GRAND RAPIDS -- A rough-and-tumble retail economy topped by a tight credit climate combined to claim another victim -- Classic Stereo and Video.
The locally owned chain succumbed today to tough competition from big box and online retailers. Its final blow came when Huntington Bank called in a loan that was several months overdue.
"This has taken twists and turns," said President John Higgs, who bought the company in April 2006. He joined Classic Stereo in 1985.
On Wednesday, he met with his employees to tell them the bad news.