America's Motor City falls apart at the seams
James Quinn – Telegraph.co.uk May 29, 2009
Strobe lights lit up the night sky around the three striking towers of the Renaissance Centre, the latest cars were on display in the glass-encased entrance hall and, outside, eight "stars and stripes" fluttered in the evening breeze.
In fact, the only sign that anything was afoot was a smattering of television camera crews waiting for presenters to spread the word to a waiting audience – that General Motors, as it stands, was in its final death throes.
Inside, as the clock struck midnight, GM's management team received final confirmation that a last hope proposed debt-for-equity swap had been rejected by unsecured bondholders.
On another floor, accounting staff began preparing to pay hourly workers two days earlier than usual – Wednesday rather than Friday. This was to ensure what could prove to be the final pay-packets for thousands of workers were not stopped by the now almost inevitable bankruptcy process that is likely to begin this weekend.
Tuesday night in Detroit typified what GM embodies – a will to keep things going for as long as possible, while everything else falls apart at the seams.
This spirit is true too of the city within which GM has grown over the past 101 years.
There is the glitz of Detroit's city centre, its flashy casino's lit up so brightly that they're visible in Windsor, Canada, across Lake Saint Clair. Meanwhile, homeless charities estimate 13,000 people sleep rough on the city's street each night, and Detroit was earlier this year estimated by Forbes magazine to have the worst crime rate in America.
Visitors arriving at Detroit's main airport in Wayne County are welcomed by imposing Ford and GM stores – a reminder that this is "Motor City". But the minute they leave the airport the bad state of the majority of the city's roads signifies that this is a region with deep economic problems.
The symbiotic relationship between the city and the car manufacturer – until recently the largest of Detroit's "Big Three" of GM, Ford and Chrysler – is evident for all to see, and is in no small part the reason why the state of Michigan has been in recession since late 2007.
The state's unemployment rate stood at 12.9pc in April, four percentage points higher than the national average, and has been above that average for at least the last seven years. The poverty rate stands at 12pc, and rising.
Metro Detroit, the name given to Michigan's largest city and its surrounding suburbs, and the state, are in terminal economic decline.
It is not just those who work directly in the car-making industry (3pc of Metro Detroit's 3.9m-strong workforce) who are suffering. Statistics from the Michigan Department of Energy, Labour and Economic Growth show that of the 22,000 manufacturing jobs lost last month, only 8,400 were in the car industry.
And, while manufacturing accounted for 66pc of the total of 38,400 jobs lost in Michigan last month, heavy losses were also recorded in retail, leisure and financial services. Even those with no direct connection to the motor trade are being hard hit.
Julie, a shift supervisor for clothing retailer Gap in one of Detroit's outer suburbs, works at the shop three evenings a week as well as working full-time as a teacher. "I do it for the employee discount," she says, before going on to admit she also does it because she needs the extra cash.
Nick Giles from the town of Waterford, on the northern edge of the Metro Detroit area, is also struggling. A former banker with LaSalle, he was laid off during a round of redundancies a year ago.
"I've got enough money to last for a year, maybe a year-and-a-half, but I don't want to keep burning through it," says Giles, who is actively looking for work, but has yet to find a vacancy – let alone a job – that would be remotely suitable.
"I haven't had a lot of success," he admits.
On a stretch of road not too far from Detroit's infamous 8 Mile road – traditionally seen as the divide between the poorer, black communities to the south and the richer, white communities to the north of the metropolitan area – sits a relatively new "strip mall" with six food retail units.
In spite of the fact there are several large office complexes nearby, only three of the units are occupied. "We're usually more busy than this," admits Mandy, a waitress in the Greek-American diner in the complex. "But things have been slowing down lately."
Just a couple of hundred feet away, the sun has finally set on what was the Sunrise Diner, its ageing yellow and green awnings fading fast.
It is not alone. "To let" signs can be seen standing along road after road in the city, attempting to attract new tenants into office space and retail outlets. But there simply aren't enough new businesses starting up or coming into the area to keep pace with those that are closing down or moving out.
One local commercial property agent dealing in retail sites, who asks not to be named because of the nature of his frank views, admits that advertising these sites is "almost entirely pointless," but says he does so because that's his job – and there aren't any other ones.
The area's retail and trade economy employs 725,000 people – some 19pc of its total workforce. It's leisure and hospitality industry a further 380,000. Its professional service occupations employ another 500,000. And they're all struggling to a certain degree.
One part of the economy already badly hurting, unsurprisingly, is Detroit's housing market. Prices in the Metro Detroit area fell by 25.7pc in the year to March, and the area is the only major US city where house price remain below 2000 levels.
Housing is one of the areas of the economy that Jennifer Granholm, Governor of Michigan, has been trying to target with her "Vibrant Cities" initiative, which is aimed at leveraging public money to improve the quality of life in the state's towns and cities.
In October, the state's housing development authority awarded $2.16m (£1.35m) in grants to not-for-profit bodies that bid for the money to help to provide affordable housing for all.
In an attempt to resurrect the moribund local economy, Granholm has also unveiled a long-term strategy to diversify the state's industry base. In April, it resulted in 14 job creation projects – in sectors as diverse as agriculture and film production – with a total of 7,700 new jobs being created.
It is a start, but small fry, working out at one job between five for each person laid off in April. Don't even mention the 22,600 that got laid off in March.
Michigan's problem is that it is a troubled state, with declining tax revenues, suffering from the loss of a major industry in the middle of the biggest downturn since the Great Depression of the 1930s.
And, just as GM has found to its cost, a bit of tinkering at the edges is not going to solve anything any time soon.
Last updated 01/06/2009