economy

In the midst of a heated debate in Washington D.C. over the U.S. debt limit and with the country facing a possible credit downgrade, Michigan’s economy is getting a pat on the back. Fitch Ratings has revised its outlook for Michigan bonds from ‘stable’ to ‘positive,’ the Associated Press reports. From the AP:

The New York ratings agency left the state's overall bond rating unchanged Wednesday at AA-, an investment-grade rating that's three steps below the top AAA rating.

Gov. Rick Snyder met with analysts at Fitch, Moody's and Standard and Poor's on June 13 to discuss the state's growing economy and how the 2011-12 budget eliminates ongoing deficits without one-time fixes.

Fitch took note of the budgeting changes. It says its positive outlook also reflects efforts to put away more in the state's rainy day fund and "grow reserve levels."

The state lost its top AAA bond rating from Standard and Poor's in 2003.

As the Detroit News reports, on Tuesday Governor Snyder told reporters that, "Lawmakers in Washington should look to Michigan 'as a good role model for success' as they try to resolve a battle over raising the national debt ceiling that is approaching a crisis."

Andrey Belenko / Flickr

Delta Air Lines says some 2,000 workers have taken voluntary buyouts. In a cost-cutting move in response to high fuel prices, it will scale back its flight schedule more than planned this year.

The high cost of jet fuel was the main reason Delta's second-quarter net income fell by 58 percent compared to a year ago. It earned $198 million, or 23 cents per share. Fuel costs were up 36 percent.

At the same time, revenue rose 12 percent as Delta raised fares to try to pay the increased fuel costs.

Delta would have earned 43 cents per share if not for one-time items including severance costs and reducing its facilities. On that basis, profit was below forecasts.

DeWitt Clinton / Flickr

UPDATE  1:45pm

The leader of thousands of rural mail employees says she’s worried about a U.S. Post Office proposal that could close many small town post offices.  The national postal officials say they need to make cuts to reduce red ink.  The postal service lost eight billion dollars last year.  

Cindy Opalek is the president of the Michigan Rural Letter Carriers Association.   She says closing small town post offices will hurt rural communities. 

“The people who work there get a little more connected…a little more bonded with the people that they serve.   That will be a shame if they lose that.    Does the (U.S.) Post Office care?   I couldn’t tell you." 

ORIGINAL POST: 1:05pm

The U.S. Postal Service has released a list of 62 Post Offices in Michigan that they're studying for closure.

The potential closures could affect smaller cities like Kingsford, Baron City, and North Star. And they could also affect bigger cities like Grand Rapids, Detroit, and Lansing.

In a statement, Postmaster General Patrick Donahue said closed offices could be replaced by "expanded access locations" - similar to how some pharmacies are now located in your grocery store:

“Today, more than 35 percent of the Postal Service’s retail revenue comes from expanded access locations such as grocery stores, drug stores, office supply stores, retail chains, self-service kiosks, ATMs and usps.com, open 24/7. Our customer’s habits have made it clear that they no longer require a physical post office to conduct most of their postal business.”

The U.S. Postal Service currently operates 32,000 retail offices (the largest retail network in the country). It's studying the potential closure of 3,700 offices.

The USPS suffered $8.5 billion in losses in 2010.

Is your city on this list? How would you feel if your local post office was closed?

Russ Climie / Tiberius Images

UPDATE 4:30 p.m.

One hundred thirty million will be available to Michigan businesses as part of a new grant program. The money is the first of the Small Business Association’s Impact Investment Initiative. The goal is to help grow and create jobs through public-private partnerships. The InvestMichigan! fund is a partnership between the SBA, Dow Chemical Company and state funds.

Karen Mills is with the SBA. She says Michigan was the perfect place to start the program.

“Michigan has great assets. It has one of the highest engineers per capita for any state. It has a well-trained workforce, it has great universities and it has extraordinary entrepreneurs,” Mills said.

The program will distribute 1-point-5-billion-dollars to businesses nationwide throughout the next five years.

- Amelia Carpenter - Michigan Radio Newsroom

ORIGINAL POST: 12:21 p.m.

Details on a public-private grant program aimed at helping small to medium sized businesses in Michigan will be announced during a press call at 1 p.m. today.

Governor Snyder will discuss the new program along with Karen Mills of the U.S. Small Business Administration, Andrew Liveris, Chairman and CEO of Dow Chemical Company, State Treasurer Andy Dillon, and Kelly Williams of Credit Suisse's Customized Fund Investment Group.

Andrew Dodson of Booth Mid-Michigan reports that Dow Chemical's investment in the program is expected to facilitate investment from the federal and state government:

According to a source close to the information, the program's impact will be "quite substantial." Dow Chemical is expected to provide funds and help facilitate bringing federal and state funds to bear upon local markets."It's meant for businesses who need financing, but can't get loans or financing right now," the source said.InvestMichigan! is a group with a series of funds focused on growing the next generation of Michigan companies, according to its website, and is one of the partners involved in today's announcement. It's federal counterpart, ImpactAmerica, is also involved.

Amelia Carpenter in the Michigan Radio Newsroom will be on the call and will have more for us later.

Niala Boodhoo / Changing Gears

From Pullman in Chicago to Firestone in Akron, these employers loomed large in everyone's daily lives.

But what does a "company town" look like today?

The Changing Gears team hit the road to find out.

All this week, we’re looking at how these places are coping with economic change.

For our first story, I visited the village of Kohler, Wisconsin.

user meddygarnet / Flickr

UM Flint received around $2.1 million in grants from the U.S. Department of Health and Human Services for nursing programs geared toward minority groups.

The university highlighted three programs that will receive funding.

  1. $1.2 million will go to a program call UM-FIND (UM-Flint Initiatives for Nursing Diversity) to continue its work aimed at "increase nursing education opportunities for students from disadvantaged backgrounds." The grant provides funding to the program for the next three years.
  2. $700,000 will go to UM-FISCUP (UM-Flint Initiative to Strengthen Care to Underserved Populations). The program educates graduate nursing students about poverty and health care disparities among medically underserved populations. "It will allow an increase in student clinical placements with underserved populations and in the number of minority nurse practitioners, and that will lead to improvements in the by and large health of Flint and Genesee County residents."
     
  3. $221,000 will be used for scholarships for disadvantaged student scholarships and $32,000  will be used for graduate student stipends for Nurse Practitioner and Nurse Anesthesia students.
Jennifer Guerra / Michigan Radio

As Michigan Radio's Jennifer Guerra reported yesterday, even lemonade stands are not immune to the down economy.

Guerra talked with Molly and Lucy Prochaska who have been in the lemonade business for five years.

They described how they stopped getting "lots of money" once the economy took a dive.

But the pair is not giving up. Especially with a competitor setting up nearby.

As you can see in the photo above, the lemonade duo is working to capitalize on their public radio appearance.

It's too early to tell whether the "Michigan Radio Bump" will pay off, but don't count these kids out.

Martin Kalfatovic / Flickr

CEO Mike Edwards sent a goodbye note to customers today as going out of business sales start at Borders Book stores across the country.

In his note, Edwards explained why the company couldn't keep their doors open:

We had worked very hard toward a different outcome. The fact is that Borders has been facing headwinds for quite some time, including a rapidly changing book industry, the eReader revolution, and a turbulent economy. We put up a great fight, but regrettably, in the end, we weren't able to overcome these external forces.

Over the last decade, the company made many missteps that led to its demise. One of the most notable was the company's failure to invest early in online book sales. Analysts say other problems included being overextended in real estate holdings for the bookstores, and a lack of leadership.

The shuttering of the company means 10,700 will be out of a job. 400 here in Ann Arbor will lose their jobs at Borders Headquarters (a place that once had 1,800 workers).

We asked our Facebook friends what they will miss when the Borders bookstores are gone.

Lemonade economics

Jul 21, 2011
Amelia Carpenter / Michigan Radio

(Here's a version of the story that aired on Michigan Radio.)

Turns out even lemonade stands aren’t immune to Michigan’s economic recession.

Molly and Lucy Prochaska have been in the lemonade business for the past five years. They sell lemonade, iced tea, and Arnold Palmers (50 cents for a small cup, $1.00 for a large.)  They also sell popsicles at fifty cents a piece, which is a new addition this year.

They’ve got a cash register, lots of signage. They're also located close to downtown, so there's a good amount of foot traffic from the Ann Arbor Art Fairs.

But 12-year old Molly says business just isn’t what it used to be:

MOLLY PROCHASKA: The first year was really nice, we got lots of money. But after that, when the economy started to go down we didn’t get as much money.

JENNIFER GUERRA: You think it had to do with the economy?

MOLLY PROCHASKA: Probably. People didn’t want to spend as much. They wanted to save their money.

The girls made around $200 their first year. Molly is saving up her lemonade money to buy a camera; Lucy wants to buy an iPad.

But it's not all doom and gloom at the lemonade stand. Molly says business this year is picking up a bit. She says that could mean one of two things: the economy's picking up, or more people are coming because it's "super hot out."

Also, side note, it looks like Molly and Lucy might have to step up their game now that a new lemonade stand popped up a block away. Not only is the new stand charging less for a cup, but they also use fresh lemons.

Ricardo Giaviti / Flickr

WASHINGTON (AP) - The Treasury Department says it has ended its investment in Chrysler LLC after Italian automaker Fiat SpA purchased the U.S. government's remaining holdings in the auto company.

Fiat paid $560 million to the Treasury Department for the government's 98,000 shares. Fiat has run the company since it emerged from bankruptcy protection in June 2009.

Treasury provided a total of $12.5 billion to Chrysler and its financing arm after the recession hampered auto sales and sent Chrysler and General Motors to the brink of collapse. The funds came from the government's $700 billion bank bailout fund.

Since then, $11.2 billion of the assistance has been repaid, Treasury says. Chrysler repaid $5.1 billion in loans from the government in May. Treasury said it likely won't recover the remaining $1.3 billion.

thewildinvestor.com

Whirlpool is reporting a loss in its second quarter. The company says the loss is the result of a legal settlement. The company announced in June that it would pay $603 million to Brazilian bank Banco Safra S.A. to settle the 20 year old dispute.

From the Associated Press:

Whirlpool Corp. is reporting a second-quarter loss largely due to the settlement of Brazilian collection dispute, but its adjusted results topped Wall Street's expectations.

But the world's biggest appliance company said Thursday that it now expects full-year earnings at the low end of its previously reported range and shares dipped 3 percent in premarket trading.

Whirlpool lost $161 million, or $2.10 per share in the past quarter. That compares with a profit of $205 million, or $2.64 per share, a year ago. Excluding the settlement and other items, adjusted earnings were $2.76 per share. Revenue climbed 4 percent to $4.73 billion from $4.53 billion. Analysts expected earnings of $2.73 per share on revenue of $4.74 billion.

Whirlpool, whose other brands include Maytag and Kitchenaid, is based in Benton Harbor. Mich.

Growing the region's clean economy

Jul 21, 2011
Photo courtesy of Geoff Horst

The clean economy is touted as a future economic driver of the region. But a new report shows that while Ohio and Illinois have added jobs to the clean economy, Michigan is the only state to have lost them. Changing Gears visited one scientist in Plymouth, Mich., who’s trying to nudge that number back up.

The Lansing-based polling firm, EPIC-MRA, released a couple of polls today. 600 "likely Michigan voters" responded for each one (margin of error is +/- 4%)

One poll indicates that more voters are optimistic about the economy. From the Associated Press:

40%...  say the state economy has bottomed out and is starting to improve, while a third say it has
bottomed out but isn't getting any better...

In May 2010, when Michigan's jobless rate was 2.5 percentage points higher than now, only 35% said the economy was starting to improve.

The other polls show Senator Debbie Stabenow's (D-MI) and Governor Rick Snyder's (R-MI) negative job ratings.

57% gave Governor Snyder a negative job rating.

51% gave Senator Stabenow a negative job rating.

From the Associated Press:

The poll released Tuesday says 38 percent gave the Democrat a positive job rating and 11 percent were undecided...

Stabenow's favorability rating was at 47 percent. Her unfavorable rating was 35 percent and 17 percent were undecided.

Senator Stabenow faces re-election in 2012. So far, the candidates who have lined up for the Republican nomination to challenge her are:

  • John McCulloch - Oakland County Water Resources Commissioner
  • Randy Hekman - Former West Michigan judge Randy Hekman
  • Peter Konetchy - northern Michigan businessman
  • Chad Dewey - a businessman who is a "self-described constitutional conservative."

Former Former Republican Congressman and gubernatorial candidate, Pete Hoekstra, is reconsidering his decision not to run against Senator Stabenow.

WASHINGTON (AP) - Counties in the Midwest and South that have a high number of autoworkers have seen a jump in economic stress levels, according to an Associated Press monthly analysis.

But Midwestern states also have seen the largest decreases in economic stress since the recession ended. That's primarily because of growth in manufacturing. Ohio has added 7,600 factory jobs in the past year.

The AP's Stress index calculates a score from 1 to 100 based on unemployment, foreclosure and bankruptcy rates. A higher score signifies more economic stress.

Under a rough rule of thumb, a county is considered stressed when its score exceeds 11. By that standard, about a quarter of the nation's 3,141 counties were stressed in May, roughly the same as in April.

Scott Schopieray / Flickr

Some grocery store shelves are being filled with more Michigan-made products. Grand Rapids based Spartan Stores recently expanded its Michigan’s Best program by stocking more Michigan products in more stores. Spartan Stores started the Michigan’s Best campaign in 2009 to stimulate local businesses and farms. Alan Hartline is an executive at Spartan Stores. He says the campaign is great for Michigan.

whitehouse.gov

Negotiations over the debt ceiling and federal budget continue in Washington D. C. 

Here in Michigan the still fragile state economy seems to be slowly improving with a recent uptick in job growth. But if the nation defaults on its debt, how is Michigan affected? Economically and politically?

In our weekly political conversation we talk with Susan Demas, political analyst for Michigan Information and Research Service and Ken Sikkema, former Senate Majority Leader and senior policy fellow for Public Sector Consultants.

Google Maps and the U.S. Department of Energy

One group in west Michigan wants to encourage more people to buy electric cars by building more charging stations.

From the Grand Rapids Press:

The West Michigan Strategic Alliance is proposing the development of at least 4,000 charging stations across eight counties. Alliance President Greg Northrup is seeking approval from county boards in Kent, Ottawa and Muskegon for the project, which would be financed through the sale of bonds and be repaid over a 10-year period.

“We’ve got $3 billion invested in battery projects in West Michigan,” Northrup said. “Why shouldn’t we have the infrastructure to go with it?”

So those are 4,000 proposed electric charging stations.

How can you find charging stations that are online now?

Google and the U.S. Department of Energy to the rescue. You can enter your address on the DOE's website to find alternative fueling stations near you.

Fast Company says "eventually, this Google/DOE partnership will serve as the primary EV charging station data source for GPS and mapping systems (like the one that may be in your car already)."

NEW YORK (AP) Pfizer says it may sell its animal health and nutrition business in the next two years so it can focus on expanding its low-cost pharmaceuticals unit.

Pfizer says it will also consider transactions including spinoffs and may pursue different strategies for each business. It said any transactions could take one to two years to complete.

The businesses brought Pfizer Inc. $5.5 billion in revenue in 2010, about 8 percent of its total. The Animal Health unit makes vaccines, medicines, diagnostics and other items to prevent and treat diseases in livestock and pets, and the nutrition unit makes infant and pediatric products.

The New York drugmaker say it will focus on its established products business, which makes drugs that are off-patent or are losing patent protection.

Adee Braun / Changing Gears

Green energy is often said to be the future of the Midwest economy. But old fashioned fossil fuels could be having a bigger effect on the region’s jobs and corporate bottom lines.

This is not conventional oil, though.

It’s a thick, tar-like crude from the oil sands in Alberta, Canada.

It’s sent here by pipelines, many which cross our rivers and the Great Lakes, and that has some worrying about a bigger risk to the region.

Midland, Mich. (AP) - Dow Chemical Co. and Japanese chemical company Ube Industries Ltd. said Wednesday they've agreed to form a joint venture to manufacture electrolytes for lithium-ion batteries
which are increasingly being used in cars among other things.

The 50-50 joint venture, named Advanced Electrolyte Technologies LLC, is expected to be finalized later this year pending regulatory approval.

Dow said the joint venture will allow it to expand its alternative energy offerings.

"The growing demand for alternative energy production and energy storage systems places technologies such as advanced batteries for electric/hybrid vehicles and power generation at the very center of the global mega-trends," said Heinz Haller, Dow executive vice president and chief commercial officer.

The joint venture's first manufacturing facility is expected to be built at Dow's home base in Midland, Mich. for startup next year.

Great Lakes harbors threatened by dredging backlog

Jul 5, 2011

The Great Lakes form a sprawling ecosystem of nature and industry.  In a strong economy, ships can transport up to 200 million tons of cargo across these waters each year.  But now the shipping industry has declared a state of emergency.  The cause is a region-wide dredging backlog.  Shippers worry sediment buildup threatens to choke some navigation channels.

MLHS

The Michigan League for Human Services (MLHS) released its "Economic Security Bulletin" today.

The report showed the unemployment rate dropping in 82 of Michigan's 83 counties when comparing the 1st quarter of 2010 with the 1st quarter of 2011 (Ontonagon was the only county that did not show a drop - going from 16.9% to 18.0%).

But despite the improvement in employment, the need for food assistance is rising.

Suncor Energy

DEARBORN, Mich. (AP) - AAA Michigan says gasoline prices are down 16 cents per gallon over the past week to a statewide average of $3.56.

The auto club says Monday the statewide average is about 71 cents per gallon higher than last year at this time. But the price has fallen 56 cents in three weeks.

Of the cities it surveys, AAA Michigan says the cheapest price for self-serve unleaded fuel is in the Lansing area, where it's $3.41 a gallon. The highest average can be found in the Ann Arbor and Marquette areas at $3.62.

Dearborn-based AAA Michigan surveys 2,800 Michigan gas stations daily.

While Greek Prime Minister George Papandreou struggled to bring calm to his country today by shuffling his cabinet, The New York Times warns that:

Patricia Drury / Flickr

In his state of the state address, Governor Rick Snyder urged the legislature to approve the construction of a new bridge span between Detroit and Windsor, Ontario.

Michigan Radio’s Political analyst Jack Lessenberry sat down with Michigan Radio’s Jennifer White to talk about the role the Ambassador Bridge has played in its 82 year history, and the reasons why a new bridge may be necessary. 

Billions of dollars a week move across the Ambassador Bridge. “It’s the most important trade crossing between the United States and Canada, and perhaps in the world,” says Jack.

The Ambassador Bridge was built largely as a beacon of prestige for Detroit in the roaring twenties, and would eventual grow to be a massive economic asset.

Jack would remind us though that “nothing lasts forever.” While the Ambassador Bridge was state of the art in 1929, it’s no longer adequate for the amount of traffic or the size of today’s tractor trailers.

--Cade Sperlich, Michigan Radio Newsroom

Greg Mason / Flickr

Chrysler says it will invest $114 million in the Trenton North engine plant and save about 268 jobs.

From Reuters:

Chrysler will repurpose about one-fifth, or 400,000-square feet, of the Trenton North engine plant to make parts for the Pentastar engine made at the Trenton South plant.

The plant was closed last month, but the need for these parts has increased as Chrysler replaces seven V-6 engines with the new Pentastar V-6 engine, Brian Harlow, head of powertrain manufacturing said in a statement.

"This investment has also given Trenton North, which has been building engines for nearly 60 years, a new lease on life," Harlow said.

The city of Trenton gave Chrysler some tax breaks in exchange for investing in and reopening part of the Trenton North engine plant.

Crain's Detroit Business reports the tax break as a "50 percent tax abatement for Chrysler for 12 years."

Trenton Mayor, Gerald Brown, said he's happy Chrysler has given the plant a new lease on life. From the Detroit News:

Trenton Mayor Gerald Brown said the city is thrilled Chrysler is reopening the plant...

On Monday, the Trenton City Council approved a tax break for the $114 million project.

"My administration worked very hard to come to an agreement that will provide the city with long-term stability at the site, additional jobs and tax base improvements while further enhancing the relationship that Trenton and Chrysler have enjoyed since the 1950s. Trenton truly is Chrysler Town and we are proud of it," Brown said.

Honda

The Japanese automaker saw profits fall sharply as it struggled to reorganize in the wake of the earthquake and tsunamis that struck the island nation last March.

From the Associated Press:

TOKYO (AP) - Honda says profit for the fiscal year through March 2012 is expected to plunge 63.5 percent as vehicles sales slipped amid a parts shortage caused by the quake and tsunami in northeastern Japan.

Honda Motor Co. gave the forecast Tuesday, more than a month later than usual. Like other Japanese automakers, the maker of the Odyssey minivan and the Fit compact needed more time to assess the
aftermath of the March 11 disaster.

Honda is projecting a profit of $2.4 billion for the fiscal year ending March 2012, down sharply from the previous fiscal year.

Reuters reports that Honda released the numbers later than usual:

Honda, like other Japanese automakers, had delayed providing financial forecasts because of uncertainty over when parts supplies would recover after the magnitude 9.0 quake in Japan's northeast. In late April, it announced a 52 percent drop in January-March operating profit after production came to a virtual halt in the second half of March.

"These figures are pretty bad," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Tokyo, adding they could temporarily push Honda's stock lower.

Fumihiko Ike, Honda's chief financial officer, said the company plans to ramp up production in the second half of the year to make up for losses - that includes boosting production at its U.S. facilities in Indiana and Alabama "to achieve a more than 20 percent output rise beyond autumn."

TOKYO (AP) - Toyota says its profit for the fiscal year through March 2012 will fall 31 percent to 280 billion yen ($3.5 billion) in an outlook that underlines a robust recovery in the latter half of the fiscal year from the damage of an earthquake and tsunami.

Toyota Motor Corp. made the announcement Friday. It had not given an earnings forecast earlier because of uncertainties in its production outlook after the disasters on March 11 wiped out key parts suppliers in northeastern Japan.

Last month, it said January-March quarterly profit crumpled more than 75 percent because of the parts shortage that is hurting production.

User Sabine01 / Flickr

Governor Rick Snyder has unveiled a new program with a law firm that will offer free legal services for about 60 start-up companies a year.

The MiSpringboard program with Varnum law firm will last five years.

Snyder says he would be open to creating similar programs with other law firms that are willing to offer free services for start-ups. 

Ford Motor Company

In the car world, engine size matters. It used to be the bigger the engine the more appeal it had (more power, and more vrooom!).

But now Ford is going small by announcing the "the smallest engine Ford has ever built."

Ford says the fuel-efficient 1.0-liter engine is a "three cylinder engine that delivers the same performance as a four-cylinder."

Ford says the engine is still being tweaked and is not in cars yet.

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