Economic recovery in Detroit can attract aftermarket manufacturing

Jan. 1, 2020
Detroit may present opportunities for aftermarket manufacturing sites upon completion of the bankruptcy proceedings.

Folks toiling in the coal mines called it the “Hillbilly Highway.” Gravel roads easing into asphalt as they headed northbound from Appalachia and other points south up to Detroit – often pronounced as DEE-troit – delivering on the promise of a solid middle class lifestyle born of work in an auto plant. The Motor City that for so long served as the pinnacle of the nation’s automotive, industrial and economic might may present opportunities for aftermarket manufacturing sites upon completion of the bankruptcy proceedings.

Once known as the “Paris of the Midwest” for its leafy boulevards and architectural splendor, “Detroit has more abandoned buildings than the entire area of Paris, France,” according to economist Dr. Timothy G. Nash at Northwood University and the University of the Aftermarket in Midland, Mich.

“The problems Detroit has have been 60 years in the making,” says Nash. Previously America’s richest city, the population has plummeted from a peak of 1.8 million people down to 700,000. Businesses and residents have fled, leaving behind a decimated tax base, scant-to-nonexistent city services and massive debt.

Apparently the immediate ramifications of the Chapter 9 bankruptcy proceedings on the aftermarket and auto industry in general are…not much.

“Most of the Michigan-based factories are outside of Detroit,” Nash says. “The thing to remember is that there’s only one of the Big 3 with a headquarters in Detroit, and that’s General Motors.”

Both the Automotive Aftermarket Industry Association (AAIA) and the Specialty Equipment Market Association (SEMA) report having “only a handful” of member companies within the city limits.

“We really don’t anticipate a significant impact on those members or the membership at-large,” says Peter MacGillivray, SEMA’s vice president of events and communications. “They rely a lot on what comes out of Detroit (regarding what the OEMs are producing throughout the entire region), but the automakers are a step or two ahead in terms of revitalization and getting their affairs in order,” he explains. “Their bad times are behind them, but the city is still reeling from the financial crisis.”

Open for business

January’s North American International Auto Show (NAIAS) in Detroit will go on as scheduled, reports Executive Director Rod Alberts. “We will continue, as planned, to work side-by-side with international auto manufacturers, which continue to rely on Detroit’s stage to make their worldwide product introductions.”

Cobo Center remains independent of Detroit’s local government and is operated by a regional authority. A $300 million Cobo renovation project is still on track to be completed in time for the auto show.

“The bankruptcy filing was a good decision, given the state of affairs of the city over the past decade, and will give Detroit an opportunity to move forward by relieving the city of a legacy of liabilities – giving it a fresh start,” says Alberts. “That was the sole purpose. The direction by Detroit Mayor Dave Bing and Michigan Gov. Rick Snyder was the right one, and will help Detroit turn the corner. Although surprising to many, it was a bold and positive move,” he asserts.

Nash and fellow Northwood economist Dr. Richard Ebeling echo similar views, noting that a “renaissance” may be in the reckoning five to 10 years down the road once the tangled ledger sheets are addressed and other civic reforms accomplished.

After “decades of mismanagement and corruption,” Ebeling says, “you have to be taking the longer view of this. The recovery will be more diverse; the auto industry won’t be all the eggs in one basket anymore. They have to make the community attractive to everyone, and everyone has to feel secure” from the threat of rampant crime.

The political climate seems ice-cold concerning any type of bailout, especially since so many other communities are in dire financial straights as well. Yet many prominent people believe something will have to be done to remedy the situation – perhaps via a coalition of regional, state, federal and public-private partnerships – based on the sheer size of Detroit and its place in history.

“They may signal that Detroit is ‘open for business,’” says Nash. “With the right public policy, and if we sell the whole package, it should make Detroit an attractive investment. It can make Detroit a good opportunity for business.”

Infrastructure in place

Second in area only to Los Angeles among American municipalities, three Manhattan Islands can fit inside Detroit’s city limits. And this vastness contains a wealth of structures and facilities that can be repurposed.

“There’s a tremendous amount of available land for factories to locate on in Detroit,” according to Nash. Most of the existing buildings would need such extensive retooling that remodeling may not be practical, he says. However, new construction sites beckon with all the important infrastructural elements already in place.

Detroit is an international transportation hub just across the border from Canada. Roads, rail lines and utilities are still up and running – presenting suitable settings that are perfect for entrepreneurial aftermarket businesses seeking manufacturing sites, according to Nash.

Educated and skilled personnel are still residing throughout the region, and Nash points out that Michigan’s recent shift to a “right to work state” presents a favorable labor environment.

“We have a chance for the renaissance of Detroit,” Nash concludes. “Like the phoenix, Detroit can rise from the ashes, and the aftermarket can play a key role in the renaissance.”

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