Blacks feel auto industry's pain; it was road to middle class

— -- Gregory Baranco, a new car dealer in Atlanta for 30 years, and George McGregor, a longtime union shop steward in Detroit, don't know each other. But their lives have a shared theme.

The men, both African American, built and sustained lives of middle-class success in the nation's domestic automobile industry, and both took a route to prosperity increasingly unavailable to others.

The financial crisis in the auto industry has been more devastating for African Americans than any other community, threatening a half-century's economic gains by the black middle class. From blacks who left behind subsistence jobs in the South for high-paying factory jobs in the North during the Great Migration, to entrepreneurs who translated hard work and the gift of selling into their own businesses — they're all getting hammered.

"One of the engines of the black middle class has been the auto sector," says John Schmitt, an economist who studies the issue at the Center for Economic and Policy Research, a liberal Washington think tank. In the late 1970s, "one of every 50 African Americans in the U.S. was working in the auto sector. These jobs were the best jobs. Particularly for African Americans who had migrated from the South, these were the culmination of a long upward trajectory of economic mobility."

General Motors and Chrysler made it into the new year, however, only with $17.4 billion in federal loans and have asked for more after March. Whether to risk more taxpayer money or let them face bankruptcy filings now falls to the administration of President Obama.

From 1979 to 2007, black employment in the auto industry fell from about one in 50 African Americans to about one in 100, Schmitt says. The trend continued last year: He estimates that the number of African Americans in the auto industry fell from about 140,000 at the end of 2007 to about 110,000 at the end of 2008.

The auto sector job losses have hit blacks harder than whites or Hispanics because the percentage of African Americans in the industry — 14.2% — still is higher than their share of the labor force overall — 11.2% — says Robert E. Scott, senior international economist at the liberal Economic Policy Institute in Washington. "This is an industry that offers particularly good wages for workers, especially for those who do not have a college degree," a group with a higher proportion of African Americans, says Scott. He says 21.9% of black workers have four-year college degrees, vs. 33.7% of whites.

An Economic Policy Institute report last month said African Americans have been especially hard-hit in this recession, with a jobless rate that rose to 11.2% in November, up 2.8 percentage points from a year earlier. The national jobless rate that month rose 2 points, to 6.7%, from a year earlier. "The consequences of an auto industry collapse … would be nothing less than catastrophic for African Americans," the report said.

The impact goes far beyond factory workers and others employed in the industry, says Randi Payton, president and CEO of On Wheels media, which publishes magazines and produces websites about the auto industry for minority audiences.

"The Big Three are leaders in philanthropy in the African-American community," he says. "They are major contributors to education through historically black colleges and universities, and to non-profits such as the NAACP, National Urban League and National Council of Negro Women.

"The auto industry also is one of the largest advertisers in African-American media," he says. "And if you're a business dependent on the auto industry, such as supplier, you're facing the same problems the auto companies are. Banks won't finance us, and in many cases, they're withdrawing lines of credit."

Detroit's struggles are reverberating among the nation's 60 or so African-American automotive suppliers, which have annual sales of about $4 billion and employ some 8,000 people, about 70% of them black, says Leon Richardson, chairman of the National Association of Black Automotive Suppliers. "This is going to be a very difficult time for African-American automotive suppliers," he says. "We have probably lost close to five (in the past 18 months) but are braced for many more."

Access to capital an issue

The picture is also bleak for black auto dealers. According to Damon Lester, president of the National Association of Minority Automobile Dealers, 150 to 200 minority dealers were among the about 800 U.S. auto stores that closed last year, and 300 more could shutter their doors this year.

Lester says most minority dealers are first-generation owners, with more limited access to capital than more established dealers. He says the federal bailout of General Motors and Chrysler won't help black dealers — or any dealers. "It gives another survival line to the manufacturers, but it does not assist the dealers in gaining access to capital," he says.

Baranco, 60, opened his General Motors dealership in Atlanta on April 4, 1978, with his wife, Juanita. By 1989, he was listed as the fourth-largest black auto dealer in the nation by Fortune magazine.

He has cut his staff from 83 to 30 in the past year and a half, and says the Buick-Pontiac-GMC facility is likely to close this year. "I'm trying to hold on while GM is going through really challenging times," he says. "They're trying to figure out what their future is going to look like and whether Baranco is going to be part of it.

"There has been nothing of this magnitude in my years in the business, because it encompasses not only the increased (foreign) competition but the credit issue," Baranco says. "I've got customers that I could have gotten financed a year and a half ago that I can't get financed now.

"I don't really think I'm going to make it," Baranco says of his GM dealership.

He'll still be selling cars — for a foreign automaker. Five years ago, he opened a Mercedes-Benz dealership. Though Mercedes' sales have been hit by the recession, too, parent Daimler has the financial resources to survive it. But it can't replace what the Detroit companies have meant to the U.S. economy and society.

Building block

It's difficult to overstate the importance of the domestic auto industry in creating the nation's black middle class, says Thomas Sugrue, professor of history and sociology at the University of Pennsylvania. "The auto industry became a magnet for African-American migrants from the South because it offered relatively well-paying, relatively secure jobs with excellent benefits," he says.

"Ford began recruiting black workers in the South in the 1920s, and became known as one of the more generous employers for African Americans. Black workers got equal pay for equal work, although they were confined mostly to unskilled jobs. Ford was well ahead of the curve in providing employment for black workers."

During the late 1920s and 1930s, the United Auto Workers union worked with civil rights activists to challenge racial bias in the industry and opened up jobs that had been closed to blacks, Sugrue says. The percentage of black workers in the auto industry skyrocketed during World War II, from 4% at the start of the war to 15% by 1945, and to 16% by 1960.

"That opening of auto employment created a black working class that had a degree of security unprecedented for most folks coming from the rural South," Sugrue says. "That opened up a whole area of upward mobility for black workers."

McGregor, 62, left Memphis for Detroit in 1968 after a stint in Vietnam. He'd heard from a fellow soldier that autoworkers in the Motor City were pulling down two or three times what he'd been making before he was drafted. "When I got out, I went home and stayed exactly one week," he says. "I got on the Greyhound bus and came straight to Detroit."

McGregor had an uncle working at Ford, another at Chrysler. He applied at GM on his first Saturday in Detroit, and was hired on Monday. "When I got the telegram that they wanted me to come out, I was standing in line at Ford. They offered me a job, too, but in order to get to the Ford job, I would have to go past the GM plant. So I took the GM job."

He started at $3.28 an hour, more than double the $1.25 he'd been making in Memphis. "It felt like 50 times more. I still have that check. I have it framed."