Economic Development

Study Outlines Post-GM Impact, Potential Next Steps

YOUNGSTOWN, Ohio – A study outlining the economic impact of the General Motors Lordstown Complex’s closing recommends finding opportunities in industries growing in the region and their supply chains, additional skills training for workers, entrepreneurship training and identifying resources from government and philanthropic sectors to mitigate the resulting job losses.

Job losses in Mahoning and Trumbull counties from the plant’s closing as it goes on unallocated status, as well as those resulting from the previous elimination of its second and third shifts, are projected to exceed 7,700, according to the study prepared by Cleveland State University.

The job losses include the 4,325 jobs held by workers at the plant, 2,306 jobs in supply chain industries and 1,053 jobs supported by the disposable income of GM and supply chain workers. For every four jobs lost at the GM plant between 2017 and 2019, two additional jobs are lost in supply-chain companies and one additional job is lost in the consumer services sectors, according to the study.

The cumulative impact of the downsizing and eventual closing of the plant includes a $1.6 billion decline in gross regional product, $725.3 million loss in labor income, and $34.5 million reduction in local and state tax. This year alone, the plant closing will result in the loss of 2,863 total jobs and $600 million decline in GRP, according to the report.

“You need to realize the breadth and depth of the impact” of the plant’s closing, said Dr. Iryna Lendel, director of CSU’s Center for Economic Development.

Lendel acknowledged that job losses and other negative impacts could be higher than estimated, depending on decisions made by individual companies. Companies more dependent on GM-related business than others unable to compensate for the lost income might have to make greater workforce reductions or close entirely. Families similarly dependent on GM-related income also might have to make difficult decisions.

The report also points out that the U.S. auto industry as a whole “never fully recovered” from the trigger of the 2001 recession and the Great Recession of 2007 through 2009, and consumers are migrating to trucks and SUVs and away from smaller cars with lower gas prices.

The Eastgate Regional Council of Governments engaged CSU to perform the impact study and a related analysis of economic drivers in the region.

“I knew the impact was going to be great when you have a catastrophic event like this,” said Genna Petrolla, economic development program manager for Eastgate “Now we know everything that we’re losing and now we have to fill those gaps strategically. It’s not going to happen overnight.”

The study quantifies the concerns held locally regarding the closure of the Lordstown plant, said Mike Hripko, associate vice president of external affairs, government relations and economic development at Youngstown State University.

“We have talked in terms of the impact on individuals and recognized that serious impact to individual employees and their families,” he said. “This study aggregated those impacts from an economic perspective and put numbers on the devastation that this is causing locally.”

Typically, communities look for alternative ways to use the workforce being displaced by closings, and there are different ways to engage those workers, such as through retraining, but those aren’t the only ways, Lendel said. Other options include entrepreneurship training, of which she is a “big proponent,” but which people, particularly in their 40s and 50s, shy away from or undervalue, she said.

“There’s a stigma that entrepreneurship is only for the young,” she said. “That’s a very false perception.”

Lendel pointed out that there is generally a workforce shortage in the U.S. economy as well as specifically in northeastern Ohio, although she acknowledged those positions might require workers to travel farther to those jobs.

The region needs to look at what industries are driving the economy, including legacy manufacturing industries such as steel and aluminum that were able to restructure, she said. Those industries tend to be capital intensive and don’t tend to hire great numbers of people, but do have significant supply chains.

The oil and gas industry also represents opportunities in the petrochemical sector for the region. “We all know the Pennsylvania cracker is coming on line fairly soon,” she said. The oil and gas and legacy manufacturing sectors combined produced $2.7 billion in output and employed more than 5,300 workers between 2013 and 2017, according to a separate report prepared by the center.

“Our challenge is going to be adjusting the workforce and adjusting the culture,” Petrolla said. Manufacturing can’t be ignored because it’s such a large share of the local economy, but recovery efforts can’t be limited to cultivating that sector, she warned.

The economic impact study was a necessary first step for applying for economic adjustment or assistance funds from the U.S. Economic Development Administration, Petrolla said. Local officials are seeking funds to hire a recovery coordinator as well as to provide other resources for workers and businesses.

“We need more capacity,” Petrolla said.

The report helps define the size of the challenge the region faces, Hripko added. “A broad spectrum of solutions are going to need to be pursued in order to recover,” he said. Although there likely won’t be an immediate singular solution, the study helps quantify the specific investments that need to be made to succeed at breaking even, let alone recovering beyond the impact of the plant closing, he said.

While the scope or size of the impact didn’t come as any surprise, having the actual numbers is helpful “to make it real and to identify what we have in front of us,” said Shea MacMillan, business development manager for the Youngstown/Warren Regional Chamber.

“It’s much easier to plan and develop a strategy moving forward when you have some type of forecast and some type of measurement,” he continued.

The data also reinforces the chamber’s efforts to diversify the local economy and make sure it isn’t dependent on any specific industry sector, said its director of research, Michelle Phillips.

Published by The Business Journal, Youngstown, Ohio.