Michigan politicians fret over GM, Chrysler's future

By Nick Carey

DETROIT (Reuters) - Merger talks between automakers Chrysler LLC and General Motors Corp leaves Michigan politicians stuck with conflicting feelings: hopeful a combined entity would prosper but fearful it would mean job losses and tax revenue, plus a huge real estate headache.

"If it means the survival of Chrysler, then I'd be all for a merger with GM," said L. Brooks Patterson, chief executive of Oakland County, home to Chrysler's headquarters. "If Chrysler were to go under it would be catastrophic."

"Unfortunately, some of the steps they would need to take to guarantee may well entail the loss of a lot of jobs," added Patterson, a Republican. "This would exacerbate a lot of problems we're struggling with here in Michigan."

Michigan's automotive labor force, once the world's powerhouse, has been decimated in years as Detroit's Big Three -- GM, Ford Motor Co and Chrysler, owned by private equity group Cerberus Capital Management -- have cut costs in a continuing battle to become consistently profitable.

In the last eight years the state has lost 300,000 manufacturing jobs, many of those in the auto industry.

In August, the unemployment rate in Michigan hit 8.9 percent, well above the national average of 6.1 percent.

"The auto industry has been hit really hard in Michigan," said Robert Ficano, the Democratic chief executive of Wayne County, which includes Detroit.

A slowing U.S. economy has only made things worse, hitting the Big Three's sales hard -- particularly of the gas-thirsty and lucrative pickup trucks, sports utility vehicles and minivans. As sales drop in the market segments they dominated, GM, Chrysler and Ford are also burning cash to survive.

Just in the past week GM said it would close an SUV plant in Wisconsin, a stamping plant in western Michigan where 40 percent of parts went to pickup trucks or SUVs, and lay off 1,500 workers at three other plants.

Against this troubled backdrop Cerberus-owner Chrysler remains in talks with GM and other automakers about a potential sale of some or all of Chrysler's assets, people familiar with the talks have said.

Politicians here worry a merger would mean thousands more job losses and a knock-on effect for local and state finances that could prompt deep cuts to government services.

'SPRAWLING BEHEMOTH'

Between them, GM and Chrysler employ about 205,000 workers in North America and produce 12 million cars annually.

GM currently employs about 64,000 unionized workers in the United States. Chrysler has 33,000 blue-collar workers here.

Labor union officials said they had not been consulted by the automakers and feared significant layoffs after a merger.