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Tiny Chevy Sonic helped with General Motors's comeback

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. The Associated Press
Monday, January 7, 2013 - 12:01 am

DETROIT – When the word reached the Orion Assembly Plant, it spread along the serpentine assembly line like news of a death or natural disaster: General Motors, the biggest automaker in the world, had filed for bankruptcy protection.

On that grim day in 2009, Chevrolet and Pontiac sedans kept rolling down the line. And 1,700 worried workers stayed at their stations even as GM announced it would close the plant in a desperate bid to survive.

"The unknown was the scariest part," recalled Gerald Lang, who had worked at Orion for two years installing dashboards and doors. "We really had no clue what was going to happen."

There was something else that the workers didn't know: They were witnessing the opening act of one of the greatest recovery stories in American business.

Nearly four years later, Chevrolets are still moving down the assembly line under the plant's 82-acre roof. Lang and his co-workers now build the Sonic, the best-selling subcompact car in the nation. It's a vehicle no one thought could be made profitably in the U.S., by a company that few people thought would last.

But GM has not only survived, it has earned $16 billion in profits in the past three years. And the industry is on track to make this year its best year since 2007.

Detroit's improbable comeback is the work of many: President George W. Bush, who authorized the first bailout loans; President Obama, who made more loans; workers who took lower wages and focused more on quality to compete with foreign rivals; and executives and designers who developed better cars amid the financial maelstrom happening around them.

To be sure, there were victims: shareholders, auto-parts makers and other suppliers who went out of business, as well as taxpayers who will never get all their money back.

But there is no denying that American carmakers have made a remarkable recovery. Nearly 790,000 people now have jobs building cars, trucks and parts, up 27 percent from the dark days of 2009. The story of the Sonic shows how the industry, along with a community in a downtrodden state, got there.

The bankruptcy wiped out GM's debts, allowed it to shed 21,000 jobs, dump 2,600 dealers and close factories, including Orion.

"It was like somebody just took the heart out of you," recalled Mike Dunn, the chief United Auto Workers union bargainer at Orion. "You didn't really know if you would have a future."

In exchange for its $50 billion bailout, the government got a 60 percent stake in the company and GM agreed to build a tiny car known as the Sonic at one of the U.S. plants it was closing. Small-car production had long been relegated to other countries where wages weren't as high. But GM couldn't take government money and build a small car overseas.

At the end of June, GM made up its mind: The Orion factory would get the small car. But there was a catch. The plant had to shut down for more than a year to be revamped — a closure that would further threaten businesses in a fragile economy.

There was another obstacle. GM and the UAW had to figure out how to cut labor costs at the plant.

For decades, the UAW and automakers fought openly as the companies tried to reduce costs and the union demanded pay increases. The UAW would strike, or threaten to, and the companies would cave in. By 2007, GM was paying $1,400 more per vehicle for labor than nonunion Toyota.

That same year, both sides agreed to a historic compromise on labor costs. They established a two-tier wage system that would pay new employees around $14 an hour, or half the hourly wage of older workers. Worker pay and pensions were frozen. Union trusts funded by the company and workers would take over retiree health care costs. Union President Bob King said each worker gave up at least $7,000 during the four-year contract.

But GM still couldn't make money building the Sonic at Orion without an immediate influx of lower-wage workers. So the UAW and GM went beyond the national agreement and came up with an unprecedented solution. More lower-wage workers could be hired at Orion than any other plant in the country. Forty percent would be paid the lower wage, as opposed to a maximum of 25 percent at other factories.

Early in 2010, Americans began returning to car dealerships as the economy improved. Sales were nowhere near pre-recession levels, but they were enough for GM to celebrate its first quarterly profit in three years.

As a dreadful winter ended, GM delivered on its promise to invest at Orion.

Crates of robot arms, carts and conveyor parts arrived, filling the vast open space that had frightened Dunn just a few months earlier.

By midyear, Lang, the assembly line worker, got an offer from GM to move 160 miles away to Lordstown, Ohio, to work on the Chevrolet Cruze. By then, it was clear Orion would reopen to build the Sonic, and there were hopes of getting another car, the compact Buick Verano.

Lang and his wife had saved some money and decided to stay in Michigan, foregoing GM pay and benefits until he was called back to work at his home plant. By summer of 2011, he was back on the job testing the assembly line.

Even when their company was in bankruptcy, GM engineers and designers across the world never stopped working on the Sonic, a new mini car that would take on the Honda Fit and Toyota Yaris. The Sonic was part of a wave of small cars from Detroit that came with more than just good gas mileage and a lower price: They had aggressive styling, better handling and more amenities like leather seats and navigation systems.

At GM's expansive technical center, 30 miles south of Orion, engineers worked to make the Sonic accelerate faster and ride quieter than the Aveo, its cheap South Korea-built predecessor. The Sonic emerged with hatchback and four-door versions. It came in eight colors, including bright orange, and it got up to 40 mpg on the highway.

The car hit showrooms with a sticker price of just under $14,000 – $1,300 less than the Fit. A year later, the tiny Chevy was the best-selling subcompact in the country. Last year, GM sold more than 81,000 Sonics. Hyundai's Accent finished second at 61,000.

GM is confident the Sonic will soon turn a profit, largely because workers at Orion keep finding ways to cut costs. Earlier this year, a team in the body shop suggested a small fix in the plant's machinery. It ensures that the car's frame fits together correctly every time and reduces the amount of steel going to the scrap heap, saving money.