Pontiac, Michigan feels brunt of GM's pain

By Nick Carey

PONTIAC, Michigan (Reuters) - The decline of U.S. automakers has for years affected those who live in Pontiac.

Now the city's dead look set to feel the pain as well.

Mayor Clarence Phillips says "we can no longer afford" the $400,000 the city spends each year on the upkeep of cemeteries in light of fresh local plant closures and job losses at General Motors Corp, the largest employer and taxpayer in the city of 66,000.

"As a city we put all of our eggs in one basket with GM," he said. "Now, as goes GM, so goes Pontiac."

Michigan cities and towns are not the only ones feeling the pain of the recession. Cities nationwide also are struggling as revenues slide and states -- grappling with their own budget gaps -- are cutting back on revenue-sharing programs.

But heavily reliant on the suffering auto industry, cities around Detroit such as Pontiac are in a bad way.

Pounded by the U.S. recession and the credit crunch, U.S. auto sales have fallen to their lowest in decades, pushing GM and Chrysler Group LLC into bankruptcy, and forcing them to close facilities and shed jobs.

GM said on June 1 that by October it would close a truck plant in Pontiac that employs 1,100 people. A GM stamping plant employing another 1,100 has been idled indefinitely.

At its peak, GM employed 30,000 hourly workers in Pontiac in the 1970s. After its latest cuts, the company's total hourly workforce will barely top that figure.

"GM's news just left people numb," said city council member Kone Bowman. "Just how much reality do people have to take?"

SOARING UNEMPLOYMENT

Even before June 1, the city was in a pickle. Unemployment hit 27.2 percent in April, more than three times the national rate of 8.9 percent that month. Property and income taxes have fallen and there were 1,000 home foreclosures in 2008.

Pontiac's budget has a deficit of $7 million, prompting Michigan Governor Jennifer Granholm to appoint an emergency financial manager in March to clean house. The GM plant closure makes that job harder.

"Sorting out our finances now is like trying to climb a glass mountain wearing greasy socks," Mayor Phillips said.

Council member Bowman said Pontiac should have seen it coming.