Auto industry bailout pulls Kokomo back from brink

KOKOMO—Jerry Price remembers the eerie silence less than two years ago when he walked through one of the transmission plants that long provided the economic lifeblood of this town steeped in auto industry history.

With the machines still and the workers gone, casualties of Chrysler's bankruptcy declaration a few days earlier, the only signs of life were a few lights that had been left on.

"None of us, including myself, ever thought that this place would be running again," said Price, vice president of United Auto Workers Local 685.

Not only has the plant reopened for business, but President Barack Obama and Vice President Joe Biden are visiting Tuesday to herald Kokomo as one of the major success stories of the auto bailout.

Residents of this town, where unemployment once soared above 20 percent after the shutdown, are doing their part to proclaim the virtues of legislation that generated plenty of controversy at the time.

"If the bailout hadn't come, then we'd be a ghost town," said Jeff Newton, a pastor who runs Kokomo Urban Outreach, which runs a network of food pantries.

Kokomo's fortunes have been entwined with the auto industry since 1894, when Elwood Haynes invented one of the first automobiles in the United States there. Since the 1930s, when then-Delco (later Delphi) located there, followed by General Motors and Chrysler, the auto industry has been the town's bread and butter.

Today, Kokomo is likely more dependent on the industry than any other city in the country — including those in Michigan, said Indiana University-Kokomo Chancellor Michael Harris, an economist who has studied the auto industry for 20 years.

Nearly 25 percent of the city's work force is employed by the industry, he said. Most work at the four Chrysler plants that employ about 4,500 today, at GM, which employs about 1,000, or at Delphi, which has about 1,400 workers.

"If the auto industry would have totally walked away from Kokomo, we would probably have unemployment that would have hit 35 percent," said Harris.

As it was, the city's unemployment rate hit 20.4 percent in June 2009, the highest level in the past decade.

"It's been very scary at times," said Dave White, 58, who has worked at Chrysler for 24 years. His wife also works for the automaker.

Kokomo leaders and business owners say an infusion of cash pulled the city back from the brink. Besides benefitting from Chrysler's $7.1 billion share of the auto industry bailout, the plant received nearly $4 million in federal stimulus money and an $89 million grant to help Delphi Automotive Systems develop electronic components for vehicles.

In September, the jobless rate dropped to 12.7 percent — the lowest rate in nearly two years.

Stimulus money paid for a new park pavilion and helped remodel a fire station. Democratic Mayor Greg Goodnight said the city used other money to remove 11 stoplights and convert several streets into one-way streets to help make downtown more friendly for pedestrians. Volunteers also planted flowers throughout downtown to spruce up the area.

While those jobs were temporary, observers say the bigger — and longer lasting — boost has come from Chrysler and Delphi, which have invested heavily in Kokomo since receiving federal help. Delphi announced a $28 million investment and Chrysler has promised more than $300 million to retool one of its transmission plants.

"There's no doubt that Chrysler has decided to make Kokomo the center of their manufacturing for the future," Harris said.

Even so, Kokomo's recovery is still in its infancy.

Newton, the pastor whose Kokomo Urban Outreach runs six neighborhood food pantries and meal programs, said the food pantries still serve about 800 people each month — the same as they did during the height of the depths of the recession.

"We had people crying in the hallways" when things were at their worst, Newton said. "They'd never had to go to a food pantry before, and they felt ashamed."

Now, instead of autoworkers scrimping on food to pay mortgages and car loans, they're seeing more minimum-wage workers to whom the recovery hasn't yet trickled down, he said.

Penny Irwin, the broker-owner of Re/Max Realty One in Kokomo, said the average price of a home in Kokomo dropped about $30,000 over the last three years. But home prices are slowly improving. According to Indiana Association of Realtors statistics, the median cost of a home in Howard County is $75,250, up from $69,900 a year ago.

Downtown has also seen a turnaround, with 13 new businesses starting up or moving in since January, said John Wiles, a former newspaper editor who now heads the Kokomo Downtown Association.

The city used an economic development income tax for some projects, made matching loans to downtown businesses to improve building facades and set up a riverfront development district along Wildcat Creek to encourage new restaurants by making it easier to obtain liquor licenses.

"We've done a lot of things for ourselves," Goodnight said.

The riverfront initiative — along with Small Business Administration financing — made it possible for father and son Steve and Blake Kinder to start Cook McDoogal's Irish Pub, a new downtown bar with lavish woodwork rescued from old churches and remodeled homes that's set to open Tuesday.

A couple of years ago, Blake Kinder said, the only people downtown were coming for court appearances. Now, it's common to see young mothers walking their babies in strollers.

"The mood has definitely risen," he said. "People are starting to feel more comfortable about Kokomo's future, whether they like to admit it or not."