Detroit automakers donate to city running on empty

9/23/2013

DETROIT — Four years after the recession and a government bailout, Detroit’s hometown automakers are riding high on strong sales and big profits.

But while the fortunes of General Motors, Ford, and Chrysler have turned dramatically, the city of Detroit is in shambles.

Perhaps nowhere in America does the view from the corner office differ so vividly from the city streets, where abandoned homes and deserted factories are a daily reminder of Detroit’s descent into the largest municipal bankruptcy in U.S. history.

It is a striking juxtaposition of corporate success in a city that cannot provide adequate police protection or keep the streetlights on.

The car companies have donated millions of dollars to the city and community groups to ease their financial pain, but city officials and industry executives realize that the Big Three can no longer provide what Detroit really needs: more good-paying jobs.

The gulf between rich and poor was underscored last year when Ford executives presented city leaders with a $10 million check to revive an empty community center in a struggling neighborhood in southwest Detroit.

In a city running a budget deficit of about $1 million a day, Ford’s gift was a windfall that would pay for a food bank, arts and dance classes, bilingual services, and education programs.

But the corporate check was little more than a financial Band-Aid in a neighborhood that has never been the same since GM closed two major factories in the 1980s that employed more than 10,000 workers.

When Mayor Dave Bing accepted it on behalf of a nonprofit Mexican-American community group last December, he could not help but wonder what the vast resources of the auto companies could do for his troubled city.

It wasn’t long ago that the city would look to the automakers, and the robust tax revenue that their factories and workers brought, to help ease times of financial stress.

In the 1960s, the auto companies and their suppliers generated an estimated 300,000 jobs in the city.

Now the number has shrunk to less than one-tenth of that total.

“Detroit’s fate is the result of decades of job flight,” said Thomas J. Sugrue, a professor of history at the University of Pennsylvania and author of a book on Detroit called The Origins of the Urban Crisis.

“The auto industry has been decentralizing since the 1950s, first to the suburbs, then to small-town Midwest and Sunbelt, and later elsewhere in America and overseas,” he said. “The city of Detroit is now only symbolically the Motor City.”

And auto jobs are continuing to disappear.

Last year American Axle and Manufacturing, a major supplier to General Motors, closed an ’80s factory complex that as recently as 2007 had 2,200 workers. The company transferred the work to a lower-cost plant in Mexico, and now plans to demolish its Detroit site.

The carmakers still have a large, visible presence in Detroit.

Chrysler operates an assembly plant and three smaller factories on the east side, as well as a branch office downtown. GM has its corporate headquarters on the riverfront, and an assembly plant that straddles Detroit and the neighboring city of Hamtramck.

Ford has no operations in the city, but some of its suppliers are there.

Since the government bailed out GM and Chrysler in 2009, both companies have recommitted to building vehicles for the long term in Detroit.

Chrysler has added two shifts at its highly profitable Jefferson North plant, and recently introduced a new version of its strong-selling Jeep Grand Cherokee sport utility vehicle. GM assigned the Chevrolet Volt plug-in hybrid and several other models to its assembly plant to keep it busy for years to come.

Yet the two automakers employ fewer than 10,000 white-collar and hourly workers in the city — with less than half actually living in Detroit.

In Ford’s case, the company hasn’t built cars in Detroit since the early 20th century. And its giant plant in nearby Highland Park, where the Model T was once built, has been vacant for about 40 years.

Although it is based in the neighboring city of Dearborn, Ford has stepped up its charitable efforts in Detroit to help reverse the decline of Michigan’s biggest city.

“Anytime Detroit is highlighted negatively in the national spotlight it’s bad for our entire region,” said William C. Ford, Jr., Ford’s executive chairman. “It hurts morale. It hurts recruiting.”

But the likelihood that any of the automakers will build a new factory in Detroit is slim. The companies are increasingly global in scope and are pouring resources into plants in China and other growing markets.

And after going through drastic restructurings to reduce overcapacity in the United States, the companies are unlikely to build new factories.

Just five years ago, all three American automakers were mired in a financial crisis because of high costs and declining revenue — much as the city faces today. Without government intervention, GM and Chrysler most likely would have failed altogether.

GM executives consider it a major achievement that they were able to salvage the Detroit-Hamtramck assembly plant during bankruptcy.

“We’re still making a lot of cars here and we are committed to it,” said Mark Reuss, head of the company’s North American operations. Mr. Reuss joined GM in 1987 — just as the company was shutting down its Fleetwood and Clark Street factories that anchored two sides of southwest Detroit.

Closing those plants also hurt surrounding commercial districts, leaving whole blocks of stores and restaurants vacant.

Civic leaders say the best hope for new jobs in Detroit is in the growing technology sector, and with thriving service companies such as the Quicken Loans mortgage business.

While the automakers aren’t expected to create many new jobs, they are trying to prop up the city with events and charitable activities, including donating new police cars and ambulances to replace old vehicles in the city’s fleet.