City braces for impact when cushions go away

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Sunday, December 20, 2009

Sweeping layoffs fueled by the demise of the local automotive manufacturing sector made a challenging economy even more difficult in 2009.

The challenges are likely to continue into and through 2010, according to local economic development officials.

Layoffs associated with the closing of the General Motors assembly plant in Janesville put more than 3,000 people out of work.

While many still are getting some form of health care and unemployment compensation benefits, others are not.

"We've certainly known that a lot of those people have a cushion associated with those jobs, but for many, the cushion is fraying at the edges," said John Beckord, president of Forward Janesville.

"Clearly, there are a number of people in the community whose safety net is about to run out, and that worries a lot of people."

While the majority of former Janesville GM workers have either left the company or transferred to other GM plants, about a quarter still are laid off, and benefits will start to end next year.

Former workers at Lear Corp. and LSI, two Janesville companies that supplied the GM plant, also are nearing the end of the benefits line.

Bob Borremans, executive director of the Southwest Wisconsin Workforce Development Board, said communities such as Janesville typically reach four economic milestones after a major plant closes:

-- The closing of the facility or facilities.

-- The loss or end of benefits.

-- The consolidation of smaller supply businesses.

-- The eventual collapse of the local real estate market.

"Our consultant has indicated that we're seeing the first of these," Borremans said. "But people haven't really reached the high stress level because they're still collecting their benefits.

"When the benefits run out, our concern is that there won't be a network for them, and all the local service providers are concerned about that."

If the loss of a dominant business can be compared to a form of economic death, where exactly is the community in the grieving process?

To answer that, Rock County economic development manager James Otterstein relies on a seven-step grief model that starts at shock and progresses through denial, anger, bargaining, depression, testing and acceptance.

Based on what he's hearing, Otterstein said the community appears to be moving between the depression, testing and acceptance phases

"This cycling, unfortunately, is being caused by the extended economic climate, andóbased on current forecastsóit appears as though this cycling might potentially exist longer than a full calendar year," he said.

Reaching the acceptance phase and moving beyond it requires a thorough understanding of the economy and its nuances, he said.

For that, he looks to economic data that suggest personal savings rates are increasing, the nation's gross domestic product is starting to rebound and inflation is relatively in check.

Unemployment and job growth, however, are expected to remain problems through 2010.

"Locally, this will be the most difficult pill to swallow because it means that we'll likely remain in the 12 percent range," he said.

Overall, Otterstein expects that 2010 will be a bleak to mild year at best.

"Data gurus are forecasting that 2011 will be the year," he said. "Of course, this forecast will be refined and sliced multiple times before 2011 arrives, and I'm not sure that anyone really has the correct answer."

Beckord said 2009 was difficult, and it's questionable whether 2010 will be any better.

Still, he said, the ghost-town predictions of a year ago haven't materialized as realities in Janesville.

"In 2010, it's my hope is that we'll start to see some rebound in the basic industries we have and some settling in for the two or three companies that are now in some level of flux," Beckord said. "I hope we'll have some announcements of new employers or expansions that will mean jobs."

Beckord and Otterstein said a critical component of the latter is the recently launched Rock County 5.0, a public-private initiative designed to foster collaboration, communication and economic development connections for the benefit of all county communities.

"It's not magic that you throw money out there and projects just appear," Beckord said. "We need a more aggressive outreach effort such as Rock County 5.0 that will result in more leads.

"I believe the table is set for us as the economy creeps back. Companies will look at Janesville and Rock County and react favorably to the labor pool here, an abundance of extremely competitive space, low interest rates and, for exporters, the attractive value of the dollar."

Last updated: 12:08 pm Thursday, December 13, 2012

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