Refuelling Motown

The world’s once mighty car hub is now a rusty relic. A desperate Detroit is wooing Hollywood and turning to agriculture for survival.

Lately, Detroit has gotten a lot of bad press. The Detroit Lions football team, which seems devoted to defeat, is frequently the punchline of Jay Leno’s jokes on national television. But this at least assures a few laughs, even if there are many people in Michigan who aren’t amused. The Pontiac Silverdome, the Lions’ former playing field, was recently sold for $583,000. Its construction in the mid-1970s had cost taxpayers $55.7 million.

Kwame Kilpatrick, the 68th mayor of Detroit who served from 2002 until 2008, only helped worsen the city’s image when he was featured in Time magazine in 2005 as one of the three worst mayors in the country. In 2008, Kilpatrick was sentenced to four months in jail for lying about an affair and assaulting a police officer.

It seems that every time Detroit is in the news, it is for bad news. It could be a story about the city’s unemployment rate, nearly 30 per cent, thrice the national average. It could be about the average price of a home in Detroit, $7,500 (as of December 2009), a fraction of the $178,400 national average (the same month). It could be about large localities turning into ‘ghost towns’, where a home can be had for as little as a $100 bill, although making it liveable would be a feat in itself. It could be about anything, the word ‘distress’ would probably feature in the report.

Frankly, Detroit is a mess. Buildings lay vacant. Landmarks are in ruins. Businesses are shuttered. The Packard automobile plant, once a symbol of Detroit’s industrial prosperity, closed its doors in 1957. Michigan Central Station, once a bustling railway hub, now sits vacant and decaying, its windows shattered. No use has been found for the building. Last year, the city voted to demolish it, but a resident blocked this action by suing the city citing the Historic Preservation Act.

Things were not always so grim. Detroit was once the pride of American industry. The Lions were once a great team. The city once boasted of almost 2 million residents. Only around 900,000 are left. So, what happened?

The answer appears to be complacency. The city focused too narrowly on the auto industry, naively believing that it would remain supreme forever.
Detroit kept cranking out the same cars on which the Big Three—GM, Ford and Chrysler—thrived for decades, unbothered by foreign competition.
Another factor was racial tension, of which the 12th Street riots of 1967 were a flashpoint. Anger over issues like unfair housing practices and police brutality flared up after the police raided an illegal nightclub, resulting in five days of rioting. The incident left 43 dead, some thousands injured, and $50 million worth of property damaged. It hastened an exodus of Whites from Detroit in large numbers, eventually leaving a Black majority. In 1950, the city was about 84 per cent White and 16 per cent Black. By 2000, it was almost 82 per cent Black and 12 per cent White, the rest being Arabs, Hispanics and others. Anyhow, when the Whites left, a lot of money went with them.

But what is to be done? One option is to help resurrect the city’s auto industry, one of the last vestiges of America’s once-prolific manufacturing base. When the US economy sputtered in the fall of 2008, many looked to Washington DC for a bailout. Detroit’s car makers were no exception. Chrysler and General Motors (GM) executives (Ford would sustain itself) sought $25 billion in aid from the US Congress, which turned them down before the then President George W Bush authorised an emergency $17.4 billion loan to the two companies.

Yet, on 30 April 2009, Chrysler declared bankruptcy followed by GM on 1 June. Chrysler LLC would become Chrysler Group LLC and General Motors Corp would become General Motors Company LLC, with many of the old firms’ assets sold off to the new companies. This way, the duo shed enough liabilities, brands, plants and dealerships to stay in business.

Detroit’s peak auto production was way back in 1955, and it has been a steady decline since. The 1970s’ Oil Shock, after the 1973 Opec oil embargo against the US in response to its support for Israel, sent petrol prices soaring and motorists scrambling to replace their gas guzzlers with fuel-efficient vehicles from Europe and Japan.

Chrysler was hit hardest, and in 1979, the then President Jimmy Carter had to step in with a $1 billion bailout package. “Part of it had to do with the price of gas, but a lot of it had to do with the fact that the economy went sour, and when the economy goes bad people don’t buy cars,” says Charles K Hyde, professor of economic history at Wayne State University in Detroit, “It is a similar situation today.”

In 1980, Chrysler began making smaller cars, an auspicious move, according to Hyde. The lesson appeared to have been learned. Or was it? Once petrol prices descended in the 1980s, Detroit went back to cranking out the big cars that Americans so love—especially SUVs. So when oil skyrocketed again some three decades or more later, peaking in mid-2008, they found themselves in the same crunch.

Thus did the US Congress approve the so-called ‘cash for clunkers’ programme, by which any owner of a gas-guzzler could trade it in for a $4,500 voucher towards a new fuel-efficient car. It was a huge hit, but cost taxpayers several billion dollars, “which they’re not going to get back”, says Gerald C Meyers, a business professor at the University of Michigan in Ann Arbor. Moreover, he adds, “It helped the Asian car makers much more than it did domestic makers because they had plenty of inventory at that time, unlike the domestics who at that time happened to be very short of high fuel-economy cars.”

Detroit’s car makers are finally rolling out enough fuel-efficient cars. The US government, which now owns 60 per cent of GM, has ensured as much. But the American buyer, no longer spooked by expensive fuel, has relapsed into his old ways. Consumer preferences tend to shift too fast for the three years that it takes for a new model from design to production. According to John Wolkonowicz, senior auto analyst at IHT Global Insight in Lexington, Massachusetts, it would take “a sustained period of about above $3.50 a gallon” petrol prices for Americans to get back into the cars currently on offer.

Of course, an auto recovery won’t be enough to rescue Detroit. That is why the city has begun to invest hope in the film industry, which has always had an association with it. What’s new is that Michigan now offers a 42 per cent refundable tax credit to Hollywood filmmakers who shoot movies here. Film studios are also being encouraged to set themselves up in the state, and vocational training in film jobs is being imparted to locals. In 2008, filmmakers spent $125 million in Michigan. The George Clooney starrer, Up in the Air, and Drew Barrymore’s Whip It! were partly shot in Detroit. In August last year, the city even made national headlines when crew members working on the sets of Little Murder were robbed at gunpoint by two teenagers.

That said, the city’s violence level does seem to be subsiding somewhat. As recently as April 2009, Detroit was named the ‘most dangerous city in America’, but in October, Forbes listed it as the 12th safest. The reduction in the murder rate from 120 in the second quarter of 2009 to 96 in the third quarter has helped.

Regardless, many in Hollywood are excited about the opportunities. “A lot of productions will be headed over there,” says Iain Alexander, president of filmindustrynetwork.biz. “Statistically, it’s obviously going to be a central place for film production because it’s advantageous in terms of tax, and also because—it’s a fairly large city—you do have a wide range of professionals.” Alexander himself might just shoot a feature film in the city. “Detroit is more friendly in terms of bringing productions over,” he says, “It’s not seen as a central production hub, but it’s changing. ” Still, some aren’t convinced. There is lack of data on just how beneficial this programme is, and there are many other states also offering tax incentives.

Detroit’s third edifying hope is agriculture. One of the city’s main problems, it appears, is that it is too large for its own good. Sprawled across 138 sq miles [about 360 sq km], it has a lot of wide open spaces. These have provoked the entrepreneurial instincts of John Hantz, who has staked $30 million on agriculture being the next big thing in Detroit. Sure, he wants a tax grant, but there are also other unsung heroes of Detroit’s agricultural renaissance. Outfits such as The Greening of Detroit and Detroit Black Community Food Security Network have been working for years to turn these empty tracts into bountiful pastures.

“That clearly has a place, and it’s going to continue to grow and that’s a wonderful thing,” says Adam Montri, an outreach specialist with the department of horticulture at Michigan State University in East Lansing, someone who is helping turn gardeners into agriculturists. “I think what we’ve seen… is that clearly everybody eats, clearly the majority of the food in Detroit is being brought into the city, while at the same time we have upwards of 25,000 acres that are vacant in the city of Detroit alone.”

So, what saves Detroit at the end, it turns out, will have to be diversity.

About The Author

Adam Molner