Janesville24.3°

GM to top Steak & Burger benefit

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JAMES P. LEUTE
October 1, 2007
— Last week's United Auto Workers strike against General Motors was short, and that's good news.

But the better news might be that even if the strike at the plant in Janesville had gone longer, the local economy is in a better position to weather it than it was 10, 20 or 30 years ago.


That's due in large part to economic diversification efforts across Rock County.


"Why have we focused on diversification?" James Otterstein, Rock County's economic development manager, asked somewhat rhetorically.


"It's exactly because of what we're dealing with right now."


While Otterstein made that observation in the midst of last week's 40-hour strike, it's one he's more and more prepared to make when there's an extended production shutdown at GM.


Several Rock County communities deal with the economic effects caused by shutdowns at GM or any of its major suppliers. In the case of the GM strike, plant workers could expect weekly strike pay of $200, which is far below their regular weekly wages. In unemployment cases, displaced workers are eligible for a weekly maximum of $355.


Longer GM shutdowns affect the local economy differently than shorter stoppages, but the fact remains that the local economy doesn't depend on GM as much as it once did.


In the late 1970s, the Janesville GM plant employed more than 7,000 people, which accounted for 10 percent of all jobs in Rock County.


But between 1980 and 2005, GM's share of county jobs dropped to 4.5 percent. Over the same period, the county's labor force has grown from about 58,000 jobs to nearly 84,000, an increase of about 48 percent.


Equally noteworthy is the decrease in the percentage of income that GM pays in Rock County, said Doug Venable, Janesville's director of economic development. In 1990, GM's payroll of $240 million accounted for 9.8 percent of the total wages paid in the county. In 2005, the automaker's payroll amounted to 5.8 percent of the $4.5 billion paid across the county.


Venable said Janesville has seen growth in the logistics/warehousing sector. A 500,000-square-foot John Deere distribution facility opened in 2001 on Janesville's south side, and a 250,000-square-foot logistics building is under construction just to its north.


The county's plastics manufacturing sector also has grown, he said, noting expansions by existing companies and new additions such as Tigre USA and Gallina USA in Janesville and SEC Container in Beloit.


"There are a number of success stories out there that show that we're getting our share of the growth in that industry," Venable said.


The well-paying health care sector has blossomed, as well. Employment at Janesville-based Mercy Health System has exploded from 589 employees in 1989 to nearly 3,800 this year.


While a relatively small portion of Mercy's growth has occurred in Janesville, the health care system has surpassed GM as the area's largest employer.


Otterstein said the county also has seen substantial employment growth in the food processing industry.


"When you look at the companies around here and the products they made 10 or 15 years ago, what they are doing today is so much different," he said. "Their products may look the same, but the manufacturing process-how they're doing it-is completely different."


An example, he said, is Beloit food processor Kerry.


"You look at Kerry and say it's a food company," he said. "It is, but it's a completely different food company with its value-added manufacturing process and its highly skilled employees."


Triggered by globalization, many domestic manufacturers have restructured their operations. The same old way of approaching and doing business is long gone, he said.


"That's created an awareness that locally and regionally we need to be proactive and aggressive in marketing ourselves to prospective businesses," he said. "We can be conducive to nontraditional businesses and show them that we're on the right track and that this is a place they can do business."


That's a key element in diversification, Otterstein and Venable said.


Venable said a local economic development alliance is continuing to establish relationships with developers and brokers, particularly in the Chicago area.


These days, most economic development site searches are done over the Internet, "which means people can exclude you before you even know what the project is," Venable said.


"Building and re-establishing relations with the key people is important so we can get them accurate information about our area before we're out of the picture," he said.


Venable said the city also has done its work at home. It's tried to keep as much work as it can at GM.


"But we still have to recognize that there needs to be growth in the other sectors," he said.


As evidence, Venable points to tax incremental financing packages that over the years have helped GM suppliers expand.


"There have also been about 40 other projects that involve other non-automotive industries," he said.


Joe Pregont, chief executive officer of the Janesville-based custom thermoformer Prent Corp., agrees that the local economy has diversified. His industry-plastics-has been one of the county's growth leaders, and it has helped place Wisconsin among the top 10 states for plastics manufacturers.


Still, he questions whether the local effort is enough. While several new non-automotive industries are expanding in and moving to Janesville, the city's economic dependence on the automotive industry is still huge, he said.


"We may not have the same numbers in terms of assembly labor at the plant, but the support companies are there, so it's still a big deal," Pregont said. "A part of the diversification may be for Lear and the others, but that's not really diversification."


Industry observers might agree, as hundreds of union jobs once done inside the walls at GM have been outsourced to supplier companies at far lower wages.


"I still think Janesville can do a better job," Pregont said. "It's important to come up with different industries.


"The city can pat itself on the back for what it's done, but I don't know that the overall employment situation is all that much better."



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