Rust Belt searches for a new economy

When word came down earlier this month that Ford Motor Company would close its Hazelwood plant in suburban St. Louis, workers were stunned. They made a top-selling sports-utility vehicle. They were slated to begin turning out a new luxury SUV.

But the future was hardly secure. The auto industry is consolidating farther east. Worse, for St. Louis and many other Midwestern industrial urban centers, manufacturing in general is losing its horsepower as an engine of growth.

These old-line urban centers need a new economic engine to propel them forward, economists say. Few have found it. Until they do, prospects for the Midwest's industrial cities don't look particularly cheery - even if, as expected, they bounce out of recession later this year.

"I don't see on the horizon how these cities are going to come back the way they were," says Sukkoo Kim, an economist at Washington University in St. Louis.

Consider St. Louis. When Henry Ford attended the 1904 World's Fair here, manufacturing was booming. So was the population. A decade later, St. Louis got its own Ford auto plant.

Now, nearly 90 years later, the automaker plans to leave the area, saying it will shutter its Hazelwood plant by mid-decade. Its rise and fall patterns the shifting fortunes of midwestern manufacturing generally.

The industrial Midwest remains a fuzzy concept geographically. Some say it reaches from Buffalo, N.Y., to Omaha, Neb. Others stretch it southward to include Kentucky and Tennessee. But the clearest reading comes from the five core states clustered around the Great Lakes: Michigan, Ohio, Indiana, Illinois, and Wisconsin. There, manufacturing exploded between the Civil War and the end of World War II, then declined. In 1947, the Great Lakes states played host to nearly one of every three American factory jobs. Today, they retain less than one in four.

But the Great Lakes states, along with the nation as a whole, have seen manufacturing's importance dwindle within their borders. But with manufacturing still accounting for 23 percent of the region's economy, it remains America's most manufacturing-dependent region - but just barely. The Southeast now lies only half a percentage point behind.

"To ask cities to continue to thrive on the basis of manufacturing ... I wonder if it's like asking them to be on the leading edge of the trailing edge," says Patrick Welch, an economics professor at St. Louis University's business school. "We are just making a fundamental change in the basic structure of the economy."

The new economy is increasingly global, knowledge-based, and computer-driven. Manufacturing can easily move outside the US, which puts additional competitive pressure on the Midwest.

While the Midwest's manufacturing base is slowly diffusing to other parts of the country and the world, the auto manufacturing that remains is concentrating in a smaller area.

In 1979, the Midwest contained just under half of auto- and truck-assembly plants; now, it's slightly more than half. Meanwhile, foreign automakers have opened new Southern plants that stretch all the way to the Gulf.

This new corridor from Michigan to Alabama and Mississippi represents the future of the industry, because it's the best place from which to ship cars all over the United States, argues James Rubenstein, chairman of the geography department at Miami University of Ohio in Oxford, Ohio.

By and large, Ford's announced closings of the St. Louis and four other plants represent the geographical shift to this new auto corridor, he adds. In all, the troubled automaker hopes to trim 20,000 jobs from its North American operations (which include Canada and Mexico).

The United Auto Workers union and the mayor of Hazelwood have vowed to try to convince Ford to change its mind. The Hazelwood plant is still slated to build a luxury SUV, the 2003 Lincoln Aviator. But many economists see this as a rearguard action.

The real trick will be for the Midwest's cities to fashion a new economic logic, economists say. Chicago, for example, has distinguished itself as a market information center through its various financial and commodities exchanges, says Dr. Kim of Washington University.

Other Midwestern cities may be able to build on their own advantages. They retain the corporate headquarters of several Fortune 500 companies out of all proportion to their size, points out Dr. Welch of St. Louis University.

Last year, for example, St. Louis tied with San Francisco for fifth place among US cities with eight Fortune 500 headquarters. Cleveland, Pittsburgh, Cincinnati, and Milwaukee all placed within the top 15, ahead of more dynamic places such as Los Angeles and Seattle.

Several of these old-line cities have tried to diversify. Pittsburgh has retooled into a center for services and specialty steel. St. Louis is trying to build itself into the nation's biotechnology center. But such efforts have not yet translated into much demographic growth.

Yet Midwestern cities continue to lose residents. Six of the 10 large cities with the biggest population losses were either located in the Great Lakes states or bordered them. These include St. Louis, Buffalo. and Pittsburgh.