Michigan finds job hope in clean energy

Marketplace Staff Jul 9, 2009

Michigan finds job hope in clean energy

Marketplace Staff Jul 9, 2009


Kai Ryssdal: In case you skipped over the fine print in the General Motors bankruptcy ruling that was handed down over the weekend, as of noon today, New York time, GM was effectively out of Chapter 11. The company’s been cleared to sell off the best bits of itself to a new GM. CEO Fritz Henderson’s supposed to make the official announcement that that’s been done tomorrow morning. The collapse of the American auto industry has left the state of Michigan with the highest unemployment rate in the country. Thousands of companies there that supply, or used to supply, parts to the big three have been squeezed as their main customers have cut back. But some of them are finding greener ways to stay alive. Dustin Dwyer of Michigan Radio has the story.

DUSTIN DWYER: Mike Hess is running late. He’s at the rental car counter at the airport in Grand Rapids, Mich. His flight from Reno was delayed more than an hour. And now he needs to drive two hours for a meeting. Hess is the head of a company called Mariah Power. It builds low-cost residential wind turbines.

The company is headquartered in Reno. But the turbines are built in Manistee, Mich. — a 100 miles north of here — by a company called Mastech Manufacturing.

Given all the hassles of traveling, it’s an easy question: why not just build the turbines in Reno? Hess says because workers at Mastech can do the job better.

MIKE HESS: Those people know what we have to accomplish from a manufacturing standpoint. They’re manufacturing people.

And more important, Hess says, they can do the job cheaper.

HESS: We made parts by hand, one at a time in Reno, Nev. It cost us $9,000. We now make that same machine for $2,500 in Manistee, Mich.

To understand what’s so different about manufacturing in Michigan, versus a place like Reno, it helps to meet John Holcomb. He’s the manager of Mastech’s plant in Manistee.

He leads me on a quick tour of the shop floor where about 40 workers used to build the machines that build cars. Mastech switched to turbines late last year right as GM and Chrysler started looking for government loans to stay solvent.

Holcomb stops at one station where a worker mills a small metal plate. Holcomb says parts like this are typically made on a lathe, a machine that spins the part so it can be cut into a circle. Holcomb says with milling, where the tool spins instead of the part, he’s able to make more parts in the same amount of time.

JOHN HOLCOMB: And we’re doing it with some special fixtures and special tools. So it’s the mindset that makes the difference.

That difference means a part that used to cost $11 now costs about $2.50 to make. Plenty of other companies in Michigan’s auto industry are trying to make this transition. The state of Michigan is offering incentives. But the green energy sector may not be a cure-all for Michigan’s economy.

Erich Merkle is an independent auto-industry analyst.

ERICH MERKLE: You just are not going to be able to create those new industries fast enough to offset the loss that’s going to occur on the automotive side.

The auto industry has already shed hundreds of thousands of jobs. The production of wind turbines, solar panels and other alternative energy equipment is expected to create only about 30,000 jobs in Michigan, according to a study by the Renewable Energy Policy Project.

And even green energy jobs aren’t immune to the recession.

Jeff Metts heads Dowding Industries, about 200 miles from Manistee. It’s another former auto supplier that’s gotten into the wind business. But Metts says orders for turbine parts dried up when the economy tanked. He’s had to lay off about half of his 260 workers.

Metts expects business to pick up. But he says he’ll need more capital to start new product lines. Meanwhile, he’s being offered incentives to move overseas.

JEFF METTS: Now, we’ve got other countries calling us, saying do it over here. China’s come here and do it. We’ll give you the funding to do it. Well, we want to do it in the U.S.

Metts and his business partner Roger Cope have heard about new green energy subsidies and incentives from the U.S. government, but Cope says, so far it’s just a lot of talk.

ROGER COPE: Find a way to facilitate this. You’ve got all this money, you know Congress has allocated all these funds, and they make these great speeches and everything, and nothing happens.

Auto-industry analysts like Erich Merkle say one of the downsides of alternative energy for businesses has always been its dependence on government support.

But it’s possible that the manufacturing expertise in Michigan may be exactly what’s needed to drive costs down and make wind turbines and solar panels cost competitive. The challenge is putting that expertise to use before it’s crushed under the weight of a collapsing auto industry.

In Grand Rapids, Mich., I’m Dustin Dwyer for Marketplace.

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