Can auto industry get Detroit's economy motoring?

A Chrysler employee working on an assembly line Detroit car manufacturers are making money again after last year's restructuring and lay-offs

Related Stories

Long before Motown, the percussive sounds of the assembly line were the real rhythms of Motor City.

And despite everything, they still are.

In the early days of the Obama administration, it all seemed less and less viable.

After years of steady decline, and despite injections of cash from Washington, fear gripped the auto industry.

Eighteen months later, things have changed in Detroit.

The big three car companies, Ford, General Motors and Chrysler, are all making money again.

There are jobs, new models that consumers want to buy, and taxpayers will soon start to get back the billions of dollars used to bail out GM and Chrysler.

After the horrors of last year - the restructuring and the layoffs - there's a mood of deliberately cautious optimism in corporate headquarters.

"We're very optimistic," says an executive of one of GM's big brands, speaking at the company's headquarters in Detroit's Renaissance Centre - a name which for years sounded merely ironic but now seems justified.

"We're not declaring victory in any way, but it tells us we've got a chance to succeed."

'A brutal experience'

The executive is anxious to point out that the changes in his brand's fortunes began well before the bankruptcy of 2009.

Detroit view Manufacturing jobs are returning to Detroit following the US bail-out package

Indeed, there's an extreme reluctance to talk about the bail-out - how it has affected GM's fortunes and what the coming months and a widely-anticipated initial public offering will bring.

It's hardly surprising. It was a bruising, brutal experience, popularly perceived in the same unflattering light as the banks on Wall Street getting a handout while Main Street suffered in silence.

But the fact remains that the Obama administration's intervention in the fortunes of Detroit has clearly worked.

It's not hard to find confidence among Detroit's GM dealerships - those that survived a savage nationwide cull.

"Business for the better part of two-and-a-half years has been profitable," says general manager Paul Zimmermann.

"Sales are up. Credit is loosening up to the point where people are getting financed easier than they have been in the past two years."

Mr Zimmermann puts his dealership's success down to common sense and sheer hard work, not a government intervention to save the auto industry.

Failed recovery efforts

But if the bail-out is perhaps the president's biggest economic achievement so far, what about all the other billions of stimulus dollars that have been pouring into Michigan?

There's certainly no shortage of roadwork signs highlighting the funding provided by the American Recovery and Reinvestment Act of 2009.

Start Quote

You've got to give them a way to stay healthy and stay engaged”

End Quote Gerry Brisson Gleaners Community Food Bank

But there is not a lot else around.

"Not much money actually hit the streets," says Professor Michael Twomey, who teaches economics at the University of Michigan.

"Much more hit the large companies, which were poised to make the requests in a speedy manner," he says.

At more than 13%, unemployment in Michigan remains considerably above the national average.

The monthly rate of home foreclosures, 18,000 in August, also remains high.

But Mr Twomey says people "would have seen it much worse had there not been those actions taken in 2008 and 2009".

In some cases, stimulus money has simply been about keeping body and soul together.

Earlier this year, it helped to put more than 10,000 food boxes on to the shelves at Gleaners Community Food Bank, which distributes food across south-eastern Michigan from a converted lumber factory in one of the city's many run-down neighbourhoods.

It might not sound like stimulus, but try telling that to Gerry Brisson, a senior manager at the food bank.

"It's stimulus because at some point people will want to and will participate in their own recovery," he says.

"You've got to give them a way to stay healthy and stay engaged."

Hollywood interest

Start Quote

Kyle Bott

It's a beautiful thing to have the film crews here. It's money in our pockets”

End Quote Kyle Bott Queen of Cups catering firm

While the debate over what the government can or should do to stimulate the economy rages in Washington, the state of Michigan continues to look around for its own solutions - like attracting Hollywood.

Since 2008, Michigan has offered huge subsidies, worth up to 42% of production costs, to companies willing to film in the state.

A year before the tax incentives were adopted, just three films were in production in Michigan.

In 2009, the number jumped to 52, with this year's total expected to be higher still.

In the past, Detroit has been asked to assume such improbable identities as Paris, but in the ABC television network's new crime drama series, Detroit 1-8-7, it plays its own suitably gritty self.

The crew is from Los Angeles, but the production has brought in plenty of local hires.

"For us, it means the world," says Kyle Bott, of Detroit catering company Queen of Cups. Mr Bott's corn chowder is keeping the crew happy as a scene is filmed in a dilapidated pool hall just a mile (1.6km) from the city's downtown.

"It's a beautiful thing to have the film crews here. It's money in our pockets. We have so many people out of work throughout this city," he says.

Pool balls in front of film equipment Over 50 film crews used in Michigan in 2009

A recent study by Michigan's Senate Fiscal Agency suggests the state is spending twice as much on incentives as it is actually making from the industry.

But Jim Burnstein, a screenwriter, teacher and vice-chairman of the Michigan Film Office Advisory Council says the impact on the local economy has been "phenomenal".

"Movies are cool. Cool places keep people around. If they stay, good things will happen," he says.

Nonetheless, a clutch of films and even a revitalised auto industry have yet to stimulate a broader recovery in Detroit.

And if Congress is even less inclined to bend to the president's will after November's elections, another big stimulus plan seems unlikely.

More on This Story

Related Stories

More US & Canada stories

RSS

Features

Copyright © 2018 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.