My car, my self--buying American in a global economy

cross-posted at Michigan Messenger

In Michigan, identifying with a car company can be like claiming an ethnicity. People boast, "we're a GM family" or "I'm from a Ford family." These loyalties have ripened over generations of auto industry employment and are rooted in the days of American auto manufacturing dominance.

There really was a time you could be sure a car was American-made (in the U.S.A.) from bumper to bumper.

In today's global production environment, cars are evaluated for "domestic," not American, content. The October Chicago Fed Letter titled "Whose part is it?-Measuring domestic content of vehicles" (by Thomas H. Klier and James M. Rubenstein) examines how the federal government determines domestic content of vehicles sold in the U.S. and the factors influencing the ultimate mix of materials.

There are actually three methods in place to determine whether a car can be called "domestic."

EPA calls a vehicle "domestic" if at least 75% of its content is produced in North America, including Canada and Mexico. The Department of Treasury, Customs Service uses the benchmark of 50% U.S. or Canadian content. The American Automobile Labeling Act (AALA) of 1992 calls a vehicle domestic if 85% of its parts originate in the U.S. or Canada. In addition, those parts must have 70% of their content from the U.S. or Canada.

The domestic/foreign distinction has become very, very blurry.

"You can't just look at the badge on a hood and think that gives you an accurate representation" of the car's origin. "You have to look at it on a model by model basis," said Bernard Swiecki, senior project manager with the non-profit Center for Automotive Research.

"The Chrysler 300C has been held up as the return of the traditional American sedan, with rear-wheel drive, V8 engine, aggressive styling, and muscle. But the car itself is built in Canada. It has a Mercedes designed transmission and the hemi engine is actually built in Mexico," he said.

"The Honda Accord is a Japanese automaker's vehicle. But certain configurations have an American transmission and engine and are built in Ohio."

The Fed Letter reports that the 2006 Honda Accord was 70% domestic, while the 2006 Ford Mustang came in at 65% domestic.

Like a nutrition label, the AALA label is there to help you decide what to buy based on your values, not just your appetite.

The AALA requires manufacturers to disclose where vehicles are assembled, where engine and transmission originate, and--in cases of less than 85% domestic content--the two foreign countries contributing the highest amount of content. This is on the same label that lists emissions and gas mileage data.

If you don't want to read the label, but still want a statistic to buttress your loyalty consider this: in 2006, 96% of vehicles sold in the U.S. by the Detroit three were assembled in North America.

Most vehicles sold in the U.S. by the Detroit three are still American-made--North American-made, that is.

Pies and Politics in Lexington, Michigan

Navy veteran, Mary Salmonowicz has been selling pies from her home in Lexington, near the shore of Lake Huron, for 22 years. When you walk into her small kitchen, the smell of fresh baking compels you to breathe deeply. But before you can enter, a hand-made sign grabs your eye.

Next to a picture of President Bush, a wordy, but direct message:
“Iraq Security ‘We can take care of ourselves.’
Iraq’s government said on Friday morning we’re taking a month break from our duties because it’s too hot. Mr. President, bring our troops home now. Iraq doesn’t need us. They don’t want us. We need our troops here. Quit playing with our military and our life and our money just because you can. Grow up.”

Her Dutch apple, cherry crumb and red raspberry pies with their light, flaky crust entice customers who disagree with her politics. “If people don’t like my sign, they just come in, get their pie and leave,”she said.

61-year-old Salmonowicz began her pie business after leaving nursing. “I just jumped in and did it. I had no idea what I was getting into.” Within ten days of quitting her job, she set up a separate kitchen at the back of her house, obtained licensing from the Michigan Department of Agriculture and started baking.

She had been a visiting nurse for private agencies, but became disillusioned as profit grew more important than quality of care. “The agency would receive a specific amount per case. If you closed the case before all the money was spent, that extra money went to the agency. There was a pressure to rush, get the patient done and get out of there.”

She tried a return to nursing five years ago, but found the demands on her time crowded the pie business. She keeps her nursing license current and imagines a kind of nursing that would emphasize patient comfort. “I would start a new type of nursing–comfort nursing. If patients are comfortable, truly cared for, and someone listens to them, they are happy. They heal faster.”

Caring for people motivates Salmonowicz’s pie baking. “I do this because I love to please people. If it pays the bills that’s all I ask.” Her customers come in for conversation as much as pie. “Sometimes I feel like bartender,”she said.

With her retirement approaching, she is making an instructional DVD of her pie making technique for her customers, and perhaps a broader audience. “A lot of people have told me they’re going to be unhappy when I retire, so I decided to make this DVD.“

This summer, Salmonowicz’s business seemed a bit slower. She says fewer visitors are coming up from metro-Detroit and attributes this to the shrinking auto industry and high gas prices. “People are selling their cottages because they have to, not because they want to,”she said.

Fortunately, her business does not depend solely on tourism. In the fall, winter and spring she bakes sirloin pasties, which she boasts “are better than anything over the bridge.” The Mackinac Bridge, that is.

Located at 5846 Lakeshore Rd. (M25) her hours are: Friday 11-4 p.m., Saturday 11-3:30 p.m. and Sunday 11-4 p.m.

DSO Contract--A Victory for Unions and the Arts

Playing in an orchestra is a rush. You are part of something bigger than any individual participant. In the best moments, there is intuitive agreement about phrasing, dynamics, tempo and expression. Your tone contributes to an idea that could never be produced by one person, yet reaches a hall full of individual listeners. Those listeners can become party to the wonder of collective expression, transported by the sheer sonic force moving air that surrounds them. Their appreciation is measured by a quick hushed silence, a collective gasp, before applause.
Unions are probably like orchestras, for some people.

Today, the Detroit Symphony Orchestra and the Detroit Federation of Musicians released elements of a labor agreement that reflects the times. While the agreement keeps the DSO in the top ten highest-paid U.S. orchestras, musicians did make concessions--3 unpaid weeks in the first year of the contract, 2 unpaid weeks in the second year, reduced pension options for new hires, and player contribution to health costs.

The Free Press reports that "musicians’ total minimum compensation"will increase "by 3.6% to $104,650 in the final year." While this may sound a princely sum to a city full of people facing hard times consider this: it is harder for a musician to land a seat in a world class orchestra, than it is for a college basketball player to go pro. Don't be fooled. $104,650 is a reasonable sum.

Related posts:
Music, Prosperity and Legislative Priorities
Great Arts State?
Michigan Arts Funding--From 4th to 50th

Hundreds Gather for Progressive Policy Summit in Lansing

Stewardship, transformation and hope emerged as key themes yesterday at the Michigan Policy Summit in Lansing. Hosted by Michigan Prospect, the event gathered hundreds of activists and concerned citizens from around the state with the purpose of drafting action plans for health care, clean energy and education.

David Hollister, Executive Director of Prima Civitas, summarized the economic and cultural challenges facing Michigan. Hollister served as a state representative, mayor of Lansing and director of the Michigan Department of Labor and Economic Growth. He assured participants that Michigan is "not facing a fiscal crisis," but rather a crisis of "political will." Hollister presented challenges and opportunities for Michigan. Among the challenges, an aging population, accelerating technological change, and "devolution in decision making" rendering the state processes nearly "irrelevant."

Among areas of opportunity and hope--the research corridor of University of Michigan, Wayne State and MSU; the 21st Century Jobs Fund; MSU President Simon's vision for a "World Grant Philosophy" in higher education; and the Venture Michigan Fund.

Keynote speaker, Donna Brazile, encouraged participants to move beyond single issues and build alliances among disparate groups and issues. Advocating inclusion, she said that working across interests will require trust and compromise. Progressives must "fight cynicism and negativity with hope for all."

She counseled,"Do not grow weary in doing good for in due season we shall reap if we do not lose heart." Yes, that's scripture--Galatians 6:9.

Housing Advocate ACORN Releases Report on Predatory Lending

The Association of Community Organization for Reform Now (ACORN) has released a report titled "Foreclosure Exposure: a study of racial and income disparities in home mortgage lending in 172 American cities".

Using data gathered according to the Home Mortgage Disclosure Act, ACORN concludes that "unaffordable loans disproportionately impact minority and low- and moderate- income families and neighborhoods."

The report examines patterns of lending among minority populations compared to affluent white populations. It concludes that:

"Nationally, African-American home purchasers were 2.7 times more likely to be issued a high-cost loan than white borrowers. Latinos were 2.3 times more likely to be issued a high cost home purchase loan than white borrowers. Similarly, for refinance loans, African Americans were 1.8 times more likely to be issued a high-cost loan than whites. Latinos were
1.4 times more likely to be burdened with a high refinance cost loan than white homeowners."

According to the report Detroit ranks first for risk of foreclosure.

Truth is Stranger than Fiction--Economic News this Week

Looks like maybe we're not in a one-state recession anymore.
U.S. payrolls decreased by 4000 instead of increasing by the expected 110,000. It's the first drop in four years.(source)

More job cuts in the knowledge-based financial sector.
Countrywide Financial, the biggest U.S. home lender will downsize 12,000 jobs (1/5 of its workforce) over the next three months. (source)

Denial runs as deep as your credit limit.
August back to school spending was brisk. (source)

Your credit limit may be increasing if you are a particularly bad risk, through the generosity of credit card companies.
Direct mail credit card offers to subprime customers were up 41 percent in the first half of this year, compared with the first half of 2006, according to Mintel International Group.(source)

Do these things taken together make any sense?

Next Friday will bring the University of Michigan Consumer Sentiment Preliminary Number for September. It's anybody's guess.

Real Economy versus Banking Sector

On any day, you can find contradictory predictions for the U.S. economy as the subprime debacle expands. Yesterday, the Fed seemed to be saying,"Don't panic. The difficulty is limited to housing." Today, Federal Reserve Governor Randall Kroszner remarked that "Turmoil stemming from subprime mortgage delinquencies could dampen demand for homes and ultimately slow U.S. economic growth."(source)

Now here's the best part from the Reuters article:
"Kroszner, cautioning that his remarks were intended to be a survey of academic research rather than a commentary on the current financial situation, said crises in the banking sector can lead to disruptions in the real economy."

The banking sector versus the real economy? I suppose the real economy is where human beings do things like live and eat and work. You don't actually need currency to do those things. You could barter, raise your own food and use passive solar power. That would obviate the need for a banking sector. The fact is we have developed to a point where most aspects of what we do are financialized.

If you thought your house was primarily the place you live, you were wrong. When you "bought" your house (if you have a mortgage), the transaction created a debt instrument, which was turned into an investment vehicle, which became someone else's gamble. You happen to live there, but it was never merely your home. It was a poker chip among millions of tiny little poker chips on an earth-sized virtual game table.

No matter how much money central banks give troubled lenders, real people are in real pain in the real economy. The real economy is where human beings are hungry and homeless and sick. It is where people feel ashamed at being laid off or falling behind on the bills. It is where parents feel devastated at not being able to buy kids a new outfit for the first day of school. And they may even blame themselves for not earning enough at a poverty-wage-paying, real-economy job.

Will the subprime crisis reach beyond the housing sector? It already has. GM is cutting back fourth quarter production 10 percent in anticipation of lower demand. (source)

And ponder this, the financial sector is a huge part of the much vaunted "knowledge economy." Any room for fairness or compassion as we move forward?

Thursday Morning News Round Up

Michigan Cyber Safety Initiative--Attorney General Mike Cox announced a new program to teach kids about internet predators. Staffers from the Attorney General's office will train teachers in the program this fall.

Detroit Free Press--"A study by the Michigan Association of Home Builders found that 1.35 million Michigan households, or 35%, can afford only homes priced under $100,000, yet the average price was $139,155 in June." Be sure to scroll down in the article for a very enlightening graph displaying how many Michiganders can afford how much home. Shocking numbers.

Detroit Free Press--Nurses at Detroit Medical Center have been attempting to form a union since February.

Detroit News--Attention, bargain hunters. Chrysler announced six-year, no interest loans to stimulate sales. "The six-year loans are available to buyers of the Dodge Grand Caravan, Chrysler Town & Country long-wheel-based minivan, Dodge Dakota, Dodge Durango and Chrysler Aspen, Pinter said. Five-year loans, which began in May, are offered for purchases of the Jeep Liberty, Jeep Grand Cherokee and Chrysler Pacifica."

Globe and Mail--"Pending sales of existing U.S. homes plunged by a record 12.2 per cent in July, and private employers hired the fewest workers in more than four years in August, according to reports released yesterday."

Guardian Unlimited--"Updating its half-yearly forecasts for the global economy, the Paris-based Organisation for Economic Cooperation and Development added to growing pressure on the Federal Reserve to ease the pressure on US borrowers when it meets later this month." Translation: Experts abroad are very concerned about ongoing problems stemming from the subprime crisis.

New York Times--"Stocks slip as Fed says credit crisis is contained." Translation: We mustn't panic.

Early Michigan Primary--Bipartisan Agreement on Renegade Scheduling

Finally, something Michigan Republicans and Democrats can agree on.

National leadership for both parties says there will be a price to pay for this renegade scheduling. And Michigan is one of at least 7 states poised to break the rules. So why have they done it?

In their own words...

From Governor Granholm's press release:
'"An early Michigan primary can lead to greater emphasis on issues that matter to all Americans,' Granholm said. 'We want candidates to talk about how they plan to enforce trade policies that are so critical to our manufacturers, the need for universal access to affordable health care, and how they plan to reduce our nation's dependence on foreign oil. In short, Michigan voters want to hear how every candidate will confront the issues that are so critical to our state and that he or she will face as president.'"(source)

Our issues are America's issues. We will help shape the debate.

From Senator Bishop:
"As I said last week, an early primary will allow all Michigan voters - not only political insiders - to exert early influence in the presidential nomination process. A primary election, in which all qualified voters can participate, will have much higher turnout - and more legitimacy - than a party caucus or convention." (source)

Greater voter participation is a good thing for the process.

From State Rep. John Proos on August 30:
"Michigan has always been a key state for candidates seeking to win the presidency, and now more than ever we need to highlight the fact that Michigan remains a strong battlefield in the '08 election. By holding an early primary election, candidates will flock to Michigan - bringing with them millions of dollars in campaign expenditures that will boost our economy." (source)

Face it, we're perceived as a swing state, a battleground. We can at least support tourism with an influx of candidates, entourages, and reporters.

Unfortunately, Democratic candidates have pledged not to visit us rule breakers. There is fear of insulting voters in Iowa and New Hampshire. There is an etiquette to this, after all.

New Hampshire goes first because it has a law that says it must. They are legally compelled to be first. New Hampshire goes first as a matter of state pride. It is also a matter of national ritual. Groundhog Day tells us about Spring's arrival and the Macy's Parade on Thanksgiving tells us it's time to shop for the holidays. New Hampshire's primary reminds us that the candidates must ask for our votes and that voters get to evaluate candidates.

Regardless of the timing of Michigan's primary, our pressing issues remain. The potential glitz and glamor of early campaigning won't fix: 2008 budget, ever increasing college tuition, workforce displacement, downward pressure on wages, high unemployment. If the legislature could muster the same bipartisanship over our budget, an early primary will have been worth any loss of delegates.

Michigan Democrats, the World is Watching

Finally, we're in the international news and it isn't some embarrassing story about a cat lady or wrongly delivered Chinese body parts. Nor is it merely a sad accounting of our economic losses. It does, however, predict electoral fallout from Democrats' disunity around primary scheduling.

The International Herald Tribune reports (Politicus: Democrats can't count on a flummoxed Midwestern electorate) on the morale and condition of our electorate and speculates that our frustrated populace may not elect a Democrat in the 2008 presidential election, in part because front runners have pledged not to campaign here if we "break" the rules and have an early primary.

And guess who gets the last word in the piece? Mr. Anuzis, of course:

"The Democrats lose in 2008? Saul Anuzis, the Republican Party chairman in Michigan, could only gloat. 'I'm doing cartwheels,' he said. 'There's nothing more the Republicans could ask for in Michigan and nationally.'"

So there you have it--Democrats in conflict and Republicans ready to win. How about Democrats ready to win and Republicans in conflict?

Washtenaw and Oakland Counties --Tops in Information Technology

Washtenaw County and Oakland County have earned honors from the Center for Digital Government for exceptional use of information technology.

Oakland placed sixth for communities of 500,000 or more and Washtenaw placed sixth for communities of 250,000 to 499,999 residents.

Community governments are rated based on responses to a survey from the Center that evaluates "more than 100 measurements and data points about online service delivery, infrastructure, architecture and governance models."

Mortgage Defaults in Britain Create Micro-Markets of Decline

Michigan may be one of the top states for residential foreclosures, but now even the Brits are getting in on the miserable action. This morning, the Guardian reports that Brits are facing "micro-markets of decline." That apt phrase may well describe the real estate situation in southeast lower Michigan and Detroit.

And this sounds extremely familiar:

The Royal Institution of Charter Surveyors "believes the trend will continue in 2008 as interest rates bite for homeowners whose fixed-rate deals have come to an end. It predicts repossessions will exceed 45,000 next year, a figure that would translate into 125 repossessions per day."

Britain's population is about five times that of Michigan, but 125 repossessions per day will affect tens of thousands of families and children.

Adjustable rate mortgages do not help people "afford" homes. Here, as in Britain, ARMs are at the heart of a default crisis. ARMs defer the moment of truth when a borrower must face the real limits of income and expenses, cash flow and variable interest rates.

Even a British accent cannot take away the sting of default and repossession.