We saved the automakers. How come that didn’t save Detroit?

July 19, 2013

It's common for headline-writers to refer to the Big Three automakers — Ford, Chrysler, and GM — as "Detroit."


The monument to Joe Louis in Detroit, known as "The Fist." (Paul Sancya/AP)

But that metonymy is misleading in a very important way. The fortunes of Detroit the city are no longer tied up with the fortunes of the Big Three automakers.

That helps explain why Ford, Chrysler, and GM have all been thriving since the auto bailout in 2009 while the city of Detroit continued to deteriorate and has now just declared bankruptcy.

From 1910 to 1950, Detroit's economy was synonymous with car manufacturing. The city was filled with dozens of factories churning out everything from Cadillacs to Studebakers — plus auto-parts plants, steel mills, foundries... Detroit's population swelled to 1.8 million as workers came from all over the country in search of good-paying jobs.

Even then, much of the auto industry's industrial base wasn't in the city proper. "From the very start, auto manufacturers preferred to locate in the suburbs—often as a tax dodge," explains Kevin Boyle, a historian at Northwestern University and native of Detroit. Ford's giant River Rouge Complex, which employed 100,000 people at its peak, was outside city limits. Even so, enough workers lived in the city to keep Detroit booming.

But starting in 1950, automakers began moving more and more of their operations further away. They looked for space in Detroit's suburbs and exurbs to build bigger plants as they began automating operations. ("You couldn't build those automated factories inside the city," Boyle explains.) They opened up plants in other states to be closer to customers. They shifted production overseas, to Mexico and Brazil, in order to save on costs.

Detroit's auto jobs kept vanishing as the Big Three lost market share to foreign automakers starting in the 1970s. At the same time, many of the autoworkers themselves were leaving the city to live in the suburbs, further weakening the city's tax base.

All told, the number of manufacturing jobs in Detroit proper fell from 296,000 in 1950 to just 27,000 in 2011. "There might not even be 10,000 auto jobs in the whole city today," says Sean McAlinden, chief economist at the Center for Automotive Research. "That's not much more than in Flint, Michigan, which has had a terrible fall."


A covered vehicle sits in part of the new paint shop at Chrysler’s Sterling Heights Assembly Plant in Sterling Heights, Mich. (Paul Sancya/Associated Press)

Today, there are only two auto factories left in Detroit. GM has its headquarters downtown (the company was required to stay as part of the auto bailout in 2009) and assembles the plug-in Chevy Volt at its Poletown plant, employing nearly 3,000 people in all. Similarly, Chrysler has moved some of its offices downtown and employs more than 4,000 people in its Jefferson North Assembly plant, which produces the Jeep Grand Cherokee.

But that's it. Most of the Big Three's main operations remain outside city limits. Chrysler's suburban headquarters, where 10,000 people work, is in Auburn Hills, about 30 miles from the city proper. Ford is based in nearby Dearborn and hasn't manufactured cars inside the city since it was cranking out Model Ts in the 1910s.

That's why the U.S. automakers can be thriving — earning $13.5 billion last year amid booming car sales, according to Bloomberg — while the city has been drowning in $18.5 billion in debt and finally declared bankruptcy this week.

Ever since GM and Chrysler received a bailout from the federal government in 2009, the automakers have been expanding at a healthy clip. Michigan has added more than 35,000 auto jobs, up 34 percent since its nadir. GM has invested more than $1.5 billion in new production facilities around North America. But few of those jobs are going to the city of Detroit.

"Occasionally some operations get moved in and out of the city, since the auto industry is constantly making shifts," said Boyle. "But I don't think there's ever been any sense that [Ford, Chrysler, or GM] is going to invest to a large extent in the city itself." Indeed, the last new auto factory built in the city was GM's Poletown plant in the 1970s and 1980s — and that was hugely controversial in the neighborhood.

Detroit does still host the North American International Auto Show every January. And the Big Three do sometimes find ways to help. According to Bloomberg, Ford is donating $10 million to help strengthen Detroit's neighborhoods, while GM donated $27 million to the city's high schools in 2011.

But beyond that, the ties between the two are weakening. "They've become decoupled," says McAlinden. "If anything, they were too coupled for too long. Once the auto industry disappeared, the city never found a way to diversify."

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Dylan Matthews · July 19, 2013