Big Three woes leave big void in Indianapolis

January 5, 2009
Chrysler LLC has not found a buyer for the site of the west-side foundry it closed three years ago.

Ford Motor Co. plans to shutter its east-side steering systems plant at the end of 2010, following through on a closing announcement it made in 2006.

Meanwhile, the city's other Big Three auto plant, General Motors Corp.'s metal-stamping factory just west of downtown, faces a murky future. In contract talks with the United Auto Workers in 2007, the struggling automaker said it would keep the plant open until December 2011, but made no commitment beyond that.

The fate of these sites—all inside the Interstate 465 loop—will have a big impact on the city's economic-development future.

In their heydays, the three plants collectively employed 11,000, though the GM plant is down to about 1,100 and the Ford plant 750. Not only do closings wipe out jobs with pay and fringe benefits topping $65 an hour, they diminish the county's tax base by millions of dollars.

"They could be very empty for a long time," said Michael Hicks, an economist at Ball State University.

But in the next generation—think 15 years or more, Hicks said—the Indianapolis plants could buzz with activity, if not a huge numbers of workers. "Those old industrial sites make ideal logistics centers," he said.

Hicks said sites with both highway and rail access—that includes Ford and Chrysler—could attract trucking or railroad companies looking for a place outside of the congested hubs in Chicago and Memphis to break down large shipments. While those "intermodal" centers typically employ fewer than 100, Hicks said they could feed a multitude of vendors, supplying things like truck parts and service.

Wages for skilled logistics workers start above $20 an hour, putting the jobs on par with those that are rapidly becoming extinct in auto manufacturing, Hicks said.

More common, however, are unskilled jobs in simple warehouses, where pay starts around $15 an hour, he said.

Vacant Indianapolis auto plants also could go the same route as east-side factories that developers in the 1980s began subdividing for a hodge-podge of tenants, many distribution-related.

"Everybody would love to have more manufacturing jobs, but what we see on the manufacturing sector are smaller companies," said Mark Writt, an industrial broker with CB Richard Ellis, Inc.

Chrysler, Western Electric and Maytag were once part of a thriving manufacturing corridor on Shadeland Avenue. Those sites now host a variety of enterprises, including a high-end go-kart track, a flooring warehouse, and the headquarters for retail merchandising specialist Pratt Corp.

"All those buildings have been bought at a low price," said Writt, who is the leasing agent for Boston-based developer First Highland, once a major land owner on the east side. "Investors buy as cheap as they can. There are costs that are going to be associated with that building, even when it's idle."

Tough time to sell

In today's credit-starved market, Writt said seller financing might be the only way to attract a buyer. "The seller is going to have to offer that developer 18 to 24 months to reposition it and market it before they have to close," he said.

Chrysler did find a buyer for one piece of its campus along Interstate 70. California-based auctioneer TruckCenter.com bought 15 acres on the east side of South Tibbs Avenue in April for $825,000, according to Wayne Township assessor's records.

TruckCenter uses the former employee parking lot and union hall for its periodic tractor-trailer auctions.

The automaker, then owned by Germany-based DaimlerChrysler, began marketing much of its 52-acre property even before the last of 900 workers exited in September 2005, but there's been little activity since it razed the foundry buildings in 2006.

Daimler sold Chrysler to the private equity firm Cerberus Capital Management in 2007.

Chrysler had multiple tracts north and south of I-70 near the Holt Road interchange. The initial asking price for the main, 24-acre foundry site was $2.1 million.

"It's great property," said Bill Brennan, III, of Grubb & Ellis/Harding Dahm & Co., who represented TruckCenter in its recent purchase. Brennan said he had clients interested in the entire acreage as soon as it hit the market in 2005.

Brennan said one reason for the slow progress is that Chrysler took the property off the market, and reintroduced it in early 2008.

The specter of a costly environmental cleanup might also affect the sale of the site, which had been in use as a foundry since the 1890s. Indiana Department of Environmental Management records have shown high levels of lead and cadmium in the soil.

Chrysler's broker, Dean Anos of UGL Equis in Auburn Hills, Mich., could not be reached for comment.

Vacancy looming

Before local officials can push redevelopment, they have to get attention from executives in Detroit.

"There's this massive corporate organization that is dealing with all sorts of these types of issues," said Nick Weber, deputy mayor for economic development.

In the case of GM and Ford, Weber said the city has to respect the fact that the companies are still operating the plants. "We just don't know what's going to shape up," he said. "Until we do, putting the resources into it is difficult."

Ford in 2007 granted United Auto Workers Local 1111 one reprieve by extending the life on the east-side plant from the end of 2008 to late 2010.

The 1.8-million-square-foot plant, at English and Shadeland avenues, is part of Automotive Components Holdings, a Ford subsidiary that oversees troubled plants.

Spokeswoman Della DiPietro said ACH planned to close three Michigan plants at the end of 2008 and in the first quarter of 2009, leaving five, including Indianapolis.

"We're still planning to wind down operations there, and discontinue production there, end of 2010," DiPietro said.

Since 2007, Ford has slashed employment at the plant from 1,400 to 750 through a series of national buyouts. UAW Local 1111 represents about 600 of the remaining employees; the rest have no union contract.

The plant's decline has cut into Warren Township's tax base. A 2005 appeal by the automaker lowered the assessed value from $24 million to $18 million, Assessor Arlene Crooke said.

"A lot of their assets have gone," she said.

In 2008, Ford's tax bill was $1.46 million.

Center Township has seen a substantial drop in the value of GM's 2.1-million-square-foot metal fabricating plant on White River Parkway.

The local plant employs 960 hourly workers, and another 112 in salaried positions.

In an appeal that covers assessments going back to 2004, GM whittled its valuation down from $34.6 million to $9 million.

"They were able to prove an obsolescence," Marion County Assessor Greg Bowes said.

If the plant closes, Bowes said, "I'm confident the value's going to be lowered dramatically."

The tax bill on the White River Parkway property in 2008 amounted to $633,435.

The local plant's future was in question long before GM began careening toward bankruptcy last fall. A GM-UAW agreement negotiated in the fall of 2007 stipulated that the plant could close "no sooner than December 2011."

UAW Local 23 Bargaining Chairman Bill Matthews noted that in 2008, Indianapolis received additional work from a sister plant in Pittsburgh that closed. "That gave us some cause for hope," he said. He added, "Again, everything hinges on the big picture, too."

The federal government last month announced a rescue plan that provides GM $13.4 billion in loans. But Hicks, the Ball State economist, believes the automaker is going to end up in bankruptcy anyway.

In that event, Hicks said any plant targeted with a closing date will go on a fast track. "Bankruptcy is going to expedite the closure.
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