The Business Outlook

Fed actions and the Big 3 will lead the summer turnaround.

GEORGE DILA
Special to the Jewish News

A

s the auto industry goes, so
goes Detroit.
It has been that way for
decades, according to David
Littmann, senior vice president and
chief economist at Comerica Bank. "It
can be our trump card in good times,
but an albatross in bad times."
Littmann says 8 percent of the
area's workforce is involved in vehicle
manufacturing. "If you add in the
suppliers — glass, plastics, rubber —
the figure goes up to 16 percent."
With such a large portion dependent
on the sale of light vehicles, specifical-
ly those manufactured by the Big 3
automakers, our local economy
booms when sales go up, and sags
when sales go down.
Right now, the slump in light vehicle
sales nationwide and the resulting cut-
back in production is having a negative
effect on almost every sector of our
local economy — manufacturing,
retailing, housing and the service indus-
tries. But, Littmann believes, sales will
improve in the second half of the year,
bringing other sectors up too.

A Modest Downturn

Littmann has data on Detroit busi-
ness that goes back to 1957. During
those 44 years, there have been seven
downturns in the Detroit economy.
"This will be the mildest of the
seven," Littmann predicts. "We'll
have stability by June, and then
things will start moving higher."
Harold Beznos, a partner in
Beztak, a Farmington Hills company
with interests in real estate develop-
ment and manufacturing, agrees.

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3/23
2001

4

"I think we
needed this pause
in growth for
things to adjust.
The economy
will come back,"
he says. "I just
hope it doesn't
inflate too fast."
Howard
Schwartz, senior
vice president for
Schostak Bros. & Dr. David Littmann
Co. in Southfield,
agrees, but from a
slightly different perspective. As a
specialist in commercial development
and leasing, he sees things from the
major retailers' point of view.
"I've seen no slowing of interest
from major national retailers in con-
tinuing to expand in this area," he
says. "There's been a slowdown in
smaller business growth — sole pro-
prietorships, independents and family

Nissan Motor
Manufacturing Corp.
USA president Jerry
Benefield far left, looks
on as employees Rick
Wilson, left, and
Darron Keith, right,
unveil the first all-new
Nissan Xterra sport-
utility vehicle on April
19, 1999, in Smyrna,
Tenn. The Xterra is the
first Nissan vehicle
designed, engineered
and built in North
America.
(Business Wire photo)

businesses. But
there's no slow-
down in the
expansion of
national compa-
nies like Home
Depot and Wal-
Mart."
Schwartz's pre-
diction for 2001?
"If there's any
softness in the
Detroit-area
economy, it will
recover very quick-

ly," he says.
Why does the auto industry
play such a major role in the econo-
my of southeast Michigan?
"Postponability," is Littmann's
explanation. When peo-
ple begin to lose confidence in the
economy, they postpone the pur-
chase of big-ticket items like auto-
mobiles. According to •'

Affordability Index developed by
Littmann, it takes the average work-
er 23 weeks of their labor to pay for
the average $22,000 new car.
"Buyers will wait," says Jeffrey
Tamaroff, owner of Jeffrey
Buick/Acura in Roseville. "They'll
wait to see a deal they like. And they
can wait a long time."
"I expect a soft year, but we won't
die," he says.
Last year, Americans bought a
record 17.4 million cars, sport utility
vehicles, vans and light trucks. But
sales for the Big 3 — GM, Ford and
DaimlerChrysler — began slowing
last year, and have continued to slow
down in 2001.
Not only have sales slipped, but
the cars the Big 3 are selling have
fewer upgrades and luxury options.
As a result, the Big 3 have experi-
enced three consecutive quarters of
production cutbacks.

