Detroit is no stranger to stirring up the automotive industry, and this is no less true during its steady decline than it was in the thriving ‘50s. Gone are the decadent days of booming industry, 1.8 million population and a central axis for global car production, 2013 sees a city in decay: deserted districts, bankruptcy and an estimated $19 billion debt.
The announcement that Motor City had filed for Chapter 9 bankruptcy comes as no surprise to those who have followed the steady demise of what was once the epicentre for US car production, but its downturn serves as a very clear warning for car-producing countries: if all your eggs are in one basket, you must ensure that Europe can’t make a better, more all-encompassing basket with a broader appeal, or that Japan can’t weave the same basket for a fraction of the price…
That may be a frivolous way of looking at Detroit’s plight, but it could, equally, be seen as representative of the city’s attitude towards its last six decades of decline. Six decades that have been allowed to tortuously pass with an underlying mismanagement, lack of provisions or contingency that has led to bankruptcy, uncertainty over assets, including pensions, and a city that can barely provide services for its dwindling population of 700,000.
What was at first a prosperous and growing industry for downtown Detroit outgrew its surroundings and moved to suburban Greenfield sites, before smaller tooling shops followed suit. Empty industrial and commercial space was left behind, workers moved to more affluent areas and the cycle never stopped – more robotic assembly was introduced, companies moved states to areas of cheaper labour, and then to Mexico, and Canada, and the rest of the world. As margins become narrower, incentives greater and the risk of moving production reduces, Detroit is an extreme yet indicative example of modern manufacturing trends.
Oil shortages, economic hardships, rising fuel prices and international competition, from Germany and Japan in particular, contributed to Chrysler’s strife and eventual bailout in the 70s, but these are global problems that still exist and there can be no such reprieve for its home-city. GM’s headquarters remain in Detroit, but it’s vital for the State that its remaining infrastructure does not continue to crumble and eventually drive-out one of its last remaining glimmers of hope for future rebuilding and economic upturn. If GM goes, there is very little left.
While GM’s presence and onward success is central to Detroit’s recovery, there are other promising signs. Real estate, for example, has seen a huge upturn in areas of the city, which has seen a large investment of capital and a steady increase in property values and population growth. Continued investment could eventually lead to utilisation of the city’s existing facilities and infrastructure by automotive manufacturers and Tier 1 suppliers. It is an example of the city finally showing signs of being able to diversify and, if it has any left, gather its last remaining eggs in search of less volatile, more secure baskets.