General Motors Corp. (GM) and Ford Motor Co. (F) , the nation's two biggest automakers, ordered fresh production cutbacks this week after they again lost business and valuable market share to Asian rivals in May. Some of their key suppliers have seen orders dwindle so much they've had to declare bankruptcy.

Add to that Friday's news of fewer jobs in the U.S. manufacturing sector as a whole, and it raises a disturbing question: Could the Midwest be falling back into the Rust Belt (search) malaise of the early 1980s, when Michigan's unemployment rate topped 16 percent and GM, the world's largest automaker, saw its market share tumble nearly 10 percentage points?

"There's definitely a headwind for the Midwest economies," said Dana Johnson, chief economist at Comerica Inc., a Detroit-based bank. "Nationally, there's not a very steep or disturbing downshift in growth, but there's a very different situation here in the Midwest because of the Michigan-based automakers and suppliers."

A generation ago, it seemed like a weekly occurrence for a Midwest steel plant or aging manufacturing plant to close and thousands of union workers to end up on the unemployment rolls as companies shifted production to lower-cost plants overseas.

While that trend hasn't disappeared, one big change now is that Asian auto manufacturers are adding jobs in the United States — although few of the new assembly plants are in Michigan or other states surrounding the Great Lakes.

Hyundai Motor Co. (search) , for example, opened its first U.S. plant two weeks ago in Montgomery, Ala. Toyota Motor Corp. (search) , meanwhile, is building another plant, this one in San Antonio, to increase production of its pickups.

Labor Department (search) figures released Friday showed that total employment nationwide rose by a smaller-than-expected 78,000 in May, in part because of a net decline of 7,000 manufacturing jobs. That followed a loss of 9,000 manufacturing jobs in April.

Earlier in the week, the Purchasing Management Association of Chicago (search) said its index of business activity in the Chicago area dropped to 54.1 in May from 65.6 in April and 69.2 in March. Readings above 50 indicate expansion in manufacturing; figures below 50 mean contraction. The following day, the Institute for Supply Management's (search) U.S. manufacturing index for May came in at 51.4, suggesting a slowdown in growth.

That makes sense when you consider that GM and Ford both saw sales fall last month — GM by 5.5 percent from a year earlier and Ford by 3 percent. In particular, the two companies are having trouble attracting buyers for their trucks and sport utility vehicles, which generate the biggest profits, in part because of aging lineups and high gas prices.

In the first five months of this year, GM's U.S. market share fell to 25.4 percent from 27 percent a year ago, while Ford's dropped to 17.9 percent from 18.8 percent. Meanwhile, Asian brands' share of the U.S. market grew to 36.5 percent from 34.3 percent, according to Autodata Corp. DaimlerChrysler AG's (DCX) Chrysler Group is the only domestic carmaker that has had a share increase this year — to 14 percent from 13.3 percent.

Both GM and Ford said Wednesday they plan to build fewer vehicles in the coming months than a year ago, which will almost certainly hurt profits for them and their suppliers. And because many of those car and parts plants are in Michigan and other Midwest states, the pain will be concentrated there.

GM plans to cut third-quarter production by 100,000 vehicles, or 9 percent, and Ford announced a cut of 17,000 vehicles, or 2.3 percent. Both companies already cut production in the first half of the year, hurting profits and squeezing suppliers. Collins & Aikman Corp., which declared bankruptcy in May, was at least the fifth supplier to seek Chapter 11 protection since last fall, according to the Original Equipment Suppliers Association.

Still, the news wasn't all bad this week for Detroit automakers.

A day after the disappointing sales reports, a closely watched industry report showed Detroit's traditional Big Three have made dramatic improvements in manufacturing productivity. GM, Ford and Chrysler accounted for six of the top 10 most productive North American vehicle assembly plants in 2004, according to the Harbour Report, which measures the hours it takes to produce vehicles, engines and other parts.

GM, Ford and Chrysler all have plants building engines in a little over three hours, about half the nearly six hours it took GM to build engines seven years ago.

"Manufacturing here in the 21st century is looking like what happened to agriculture in the early 20th century, when we saw astounding productivity growth," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. "We're in a manufacturing revolution."

If the Big Three continue to improve productivity, Cole said, automakers will be less likely to move jobs to cheaper markets because the cost to transport products back to the United States would cancel out the savings on labor.

But Cole said Midwestern states also must be vigilant and invest in education if they want to keep manufacturing alive. He points out that a new Chrysler plant being built in Michigan will require its hourly employees to have at least two years of community college.

"What we're entering is a pretty dramatic period," he said. "We're not educating people to the level that is going to be required."