Mishawaka: Caught in a Global Bind
By Mike Hanley
Cars.com
In the past year, Mishawaka has been whipsawed by dramatic changes, both at home and abroad.
In the last 12 months, the town went from wondering who’d buy Hummer — whose H2 SUV was built here — to seeing that assembly line shut down. Now, GM has reached a deal to sell the Hummer brand to a Chinese firm. In addition, there are fears that the gradual pullout of U.S. troops in Iraq could mean the loss of jobs for AM General workers building the Humvee.
The Hummer sale is something few would have envisioned for the iconic American consumer brand a few short years ago, but one that could have a direct impact on Mishawaka and the surrounding area.
“Do I personally like it? No. If it keeps jobs here locally, I guess it’s more tolerable,” said Kevin Candler, manager of Mr. G’s Restaurant and Lounge in nearby Osceola, about the possibility that a Chinese company could buy Hummer. “I guess it’s better than them buying the brand and making the Hummer overseas.”
On Friday, GM announced its deal to sell Hummer to Sichuan Tengzhong Heavy Industrial Machinery, pending the approval of both the U.S. and Chinese governments. The deal calls for H2s to be built in Mishawaka until June 2011, with an option to continue until June 2012. How many H2s would be built is unclear.
It’s likely this new H2 production is primarily for export markets, since U.S. sales of the H2 slumped 51 percent in 2008, when gas prices soared. Fuel prices have since receded, but the future of Hummer remains clouded; Hummer sales are down 64 percent through September of this year, and the H2 is down 74 percent. The halt of H2 production late last year no doubt contributed to these stark declines. After production ended, AM General redeployed the remaining H2 work force — more than 220 people — to military-specific work, according to a spokesperson.
“My concern with Hummer — and even if it’s bought by this Chinese buyer — [is] what are you going to do with it?” said Erich Merkle, president of industry analysis firm Autoconomy.com. “There isn’t a market for the vehicle anymore.
“The brand I think was really more of a fad. It’s run its course.”
Region Wrestles With Recession
The Mishawaka region has been caught up in the national economic downturn. Mishawaka Mayor Jeff Rea says the unemployment rate for St. Joseph County is around 9.5 percent, which is more than double what it was only a year ago. Of course, with more than 2,000 employees dedicated to production, AM General is one of the biggest employers in the region, and its employment influence extends beyond its walls.
Economic development in the region has been affected, too. “Last year, we saw $300 million of new capital investment,” Rea said. “This year we’re about $20-$25 million.”
Despite those sobering figures, Rea said there was an uptick in August. Good news — especially if it’s the beginning of a recovery — but Mishawaka’s residents are trying to figure out what the future holds for them.
Perhaps it means going in a different direction entirely.
In conjunction with AM General, the Vehicle Production Group expects to begin production in about a year of its MV-1, which will be built in the same facility used to build H2s. Designed for taxi duty and transporting people with disabilities, the MV-1 is similar in size to the H2 and bears a vague resemblance to the boxy SUV.
While swirl continues around H2 production, the much older military-spec Humvee continues to serve militaries around the world. First offered in 1985, the Humvee has been sold to more than 50 fighting forces, according to AM General. It’s seen plenty of action in Iraq in recent years; although an AM General spokesperson says the withdrawal of U.S. troops from that nation hasn’t affected Humvee production or employment in Mishawaka, some fear that it could.
“That is a concern,” said Indiana Sen. Joe Zakas (R-Granger). “A reduction could affect our community.”
Rea doesn’t think Humvee-related jobs are at risk, and points out that AM General has plenty of contracts with the federal government.
“I think there’s a pretty good idea already what the federal government is going to buy and sort of plan ahead for that,” he said.
Candler agreed.
“With the war — I guess — winding down in Iraq, if that’s going to have a direct effect on production here, it could, and it probably will most likely,” he said. “But then on the flip side, we’re hot and heavy in Afghanistan now and Humvee — I guess — is one of the most versatile vehicles the Army has right now.
“I don’t think it’s going to wind down anytime soon.”
Next…Does a Phoenix Grow in Elkhart?
Previously…Indiana: The State of U.S. Automaking
