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Sluggish Michigan Economy Pinned on Big Three Market-Share Losses, Crain's Detroit Business Analysis Shows

DETROIT, Nov. 29, 2004 -- Why is Southeast Michigan lagging the rest of the country's economic rebound?

An analysis of economic trends by Crain's Detroit Business suggests the 14-point loss in market share among the Big Three automakers over the past decade is the primary culprit.

In a report in the Nov. 29 issue of Crain's, reporter Terry Kosdrosky pins the slow recovery on the market-share losses that have prompted the automakers to squeeze suppliers for price reductions. In 1995, Ford Motor Co., General Motors Corp. and what is now the Chrysler Group made 73.2 percent of the cars and light trucks sold in the United States; that had dropped to 58.9 percent through October 2004.

Among the findings:

* Michigan's per capita personal income was above the U.S. average in 1994 but had dropped below the average by 2003. Per capita income in Michigan was $22,694 in Michigan in 1994, compared with $22,172 nationally. By 2003, national personal income had risen to $31,632, but Michigan's was only $30,439.

* Detroit area auto industry employment accounted for 416,000 jobs in 1995 but had dropped to 401,000 in 2004. The drop was especially painful because employment had peaked at 516,200 in 2000.

* Machine-tool suppliers employed 55,500 people in metro Detroit in 1995; by September 2004, the number had dropped to 34,400.

* Michigan's gross domestic product growth has lagged the nation's seven times in the past 11 years. The annual U.S. GDP increase has averaged 2.76 percent since 2000, but Michigan's average growth was 1.06 percent.

* Because of higher health care and pension costs, employers are using a higher threshold to justify adding a job. One metal stamper told Crain's his old formula was $90,000 in new business, minus costs. The new formula requires $150,000 in new business.

Automakers believe new models will help boost market share.

But economists believe Michigan, especially Southeast Michigan, needs to bring in "filler industry" or expand existing sectors to help boost the state's economic fortunes.

In an editorial accompanying the package, Crain's calls on Michigan to reform its tax structure to be friendlier to job creation and to reduce the size of state government to focus on outcomes rather than simply adding an increase to the previous year's spending.