Having the luxury of not living in an automotive based city my entire life, I realize it's hard for states in the coastal regions to feel the impact of Ford's most recent layoffs.
In Michigan if you work at one of, what is commonly known as the "Big Three" assembly plants you are doing well. The "Bit Three" refer to Ford, Chrysler and GM. Yes, you are a fork lift driver or you work on the assembly line, but you are also making a six figure income. Hard to believe but true. Until recently forklift drivers at Delphi were commanding six figure incomes. Six figures in MI is equivalent to making $145,000 in New Jersey. You are living quite well. No headaches, low stress (compareritively speaking), and a fat check.
Let's look at the typical lifestyle of a United Auto Worker. Say his name is Bill. He has been on the job for 20 years now. From 1996-2000 he made about $115,000 annually with proift sharing bonuses nearing $6700 bucks right at Christmas time. His wife has quit working to help raise their three kids. Bill has a house up North (very common in Michigan), with that property a mortgage, 2 snowmobiles and a small boat. His primary residence is valued at approximately $295,000. He decided to move to a bigger house when mortgage rates dropped super low a few years back. He drives a brand new Ford F150, and his wife drives a 2 year old Explorer. His 18 year old daugther drives the old family car that has 5 more payments left. When Bill brought the bigger house he upgraded to a riding lawnmower (compliments of a Home Depot card that he got 10% off his first purchase). You know Bill couldn't just get the lawnmower without getting a snowblower and a fancy little shed to store all of his new goodies. Also to compliment the new house his wife had to have furniture, not to mention all of the home theater equipment Bill got from Best Buy. It's Ok though. Bill didn't have to make a payment on the furniture until 2006!
Bill's credit rating is sky high, and so are his credit card bills. He's not worried because he will be getting a $6700 check ($4,2,00) after taxes just in time for Christmas.
That check doesn't come doesn't come in 2001. "Oh well, I will just use my overtime money after the Christmas holiday" , Bill says to his wife . Since 2001, the average UAW (United Auto Worker) overtime hours have been cut 5 hours weekly a year or $10,000 annually. The $6700 average profit sharing was now a measley $600 in 2004.
Bill and his wife were just hoping that the economy would bounce back, instead of making the necessary lifestyle adjustments that were needed. Now if Bill gets laid off, he and his family don't know what to do. Bill has driven a forklift for the last 20 years. He has no other marketable skills. This is typical, like the guy who puts the doors on the car you are driving. He has been working 60 hours a week, and snowmobiling, lawn cutting and watching football on his 42 inch plasma. When and why would he want any more skills.
Bill's scenario is probably typical for about 45% of the population in the Detroit area. (this figure is a guess, all other monetary figures taken from "The Detroit News").
That is why it is very important not to over extend yourself. A smart Bill would have been stacken his chips. Bill would be chillin' if he had stayed in the smaller house which he had about $50,000 of equity in. No furniture payments, no Best Buy, or Home Depot bills, no fees to pay the new housing community and lower taxes. He could have used all of that money to pay off his and his wife's vehicles. Then, if he gets layed off the buyout would be more then enough for him to land on his feet. He would see it is a cash cow, and possibly have the ability to relocate, or start a business for himself. Simpler then that, he could use it to go to school and become marketable in a different field.
As with any delcine in the economy there is money to be made. With the "to good to be true" mortgage deals everyone recieved, people are desparetly over extended. Those three year arms are now expired. The housing market is tanking and real estate is looking like a good long term investment.
Although I have my sites on many a real estate endeavor, the plan is defintley not to try to buy and sell. There is no one to sell to. I literally know 6 people with two houses becuase they can't sell one. The idea is to rent to people like Bill who have to foreclose on their house, while he takes a low paying job and his wife has to check me out in Kroger. (Cruel but true. I could be bagging for his wife tomorrow. ) I will only buy property here if I see an economic up turn in the near future. Will a company like Toyota come to Michigan and buy all of these plants that are already set up to support that type of business? Will Nissan partnership with GM like Daimler did Chrysler? Google has made a small move to Ann Arbor. Then I can make my move. I will have to buy, and hold, and hold, and hold, and then sell. I have no problem with that.
I will be like the Black Donald Trump in this Bitch (minus the hair flip). First I have to stop my small business from bleeding all over my bank account, then I can move forward. One thing at a time.
AT LEAST GAS IS CHEAP AGAIN (GOTTA LOVE ELECTION TIME) !