When I talk to out-of-state relatives, they begin the conversation with the same pity-laden inquiry: “So how’s it going out there?” By “out there” they mean the state with the worst unemployment figures, rampant foreclosures, corrupt former mayors, headline-grabbing corporate meltdowns and enough clinical depression to put a squeeze on the country’s Zoloft supply.
Michigan’s slide into unwanted notoriety has been led by the collapse of the domestic automobile industry – once an engine for the economy, and now a drag both here at home and across the nation.
But unlike last winter (and spring, and summer), the news is looking a little brighter lately. Mind you, I’m not declaring “Mission Accomplished,” but the collective headlines that came out just this week could mean the auto industry, and by association the state of Michigan, could be on the mend.
Some Positive Signs at Ford, GM
The brightest news this week: Ford Motor Co., the only domestic manufacturer that opted not to take loans from the federal government, posted a near-$1 billion profit for the third quarter, built in part from a profit of $357 million from its North American operations. That is the first profit Ford has seen from its domestic unit since 2005.
Ford’s turnaround is tenuous, though. It still is sitting on a mountain of debt: more than $23 billion. That’s the equivalent of getting a job after a year of unemployment, and only now being able to face up to the maxed-out credit cards and home equity loans. And while Ford has some decent product out now, it is going to find it difficult to sustain a pipeline competing with other companies who shed their liabilities through bankruptcy, and now can devote more dollars to new cars and trucks.
It beats getting poked in the eye, though, and CEO Alan Mulally is predicting a return to annual profitability in 2011. Just one more year…
Meanwhile, east of Dearborn at the RenCen, the surviving General Motors crew is crawling to shore after the ship went down this summer. The public ire over billions of dollars in federal loans has apparently abated and they are buying GM cars again, up 4% versus October 2008 and up 13% over September 2009.
Perhaps more telling than sales, though, was GM’s decision to keep its European car unit, Opel, after a protracted effort to sell it to Magna – a giant Canadian parts supplier – and a consortium of Russian investors. The decision to keep Opel can only be based on optimism from the executive suites and a bullish forecast for the coming year.
In calling off the deal, GM managed to outrage both the German and Russian governments who had their own agendas and expectations built into the buyout. At least the taxpayers are getting some entertainment out of the federal loans, if nothing else just now.
What’s Up with Chrysler?
And then there is the plucky Chrysler that just won’t say die. In an all-out corporate marathon, Fiat/Chrysler-boss Sergio Marchionne took six long hours to outline the next, long five years that will pave the way to a Chrysler revival, largely on the backs of Fiat production platforms.
If the plan holds true, Fiat will do more for Chrysler in just two years, in terms of product sharing, than Daimler did for Chrysler during its entire ownership tenure. And Americans may, once again, be able to buy Fiats and Alfa Romeos at local Chrysler dealerships.
There are plenty of industry analysts and home-schooled amateurs who are writing Chrysler and Fiat off. Marchionne reminded the audience that the same dire predictions were made about Fiat before he took the helm there, and the company wound up turning a record profit in 2008.
Mind you, 2009 isn’t looking nearly as hot for Fiat but no one is lighting cigars with hundred dollar bills these days. If someone is going to try and revive the clinically dead Chrysler, it might as well be someone who has been through it all before.
The Road Ahead for Michigan
The slow and painful return of these three companies could mean better times ahead for Michigan. But that shouldn’t mean Michigan should give up its efforts to bring diversity to its business base. Foregoing efforts to bring other high-tech companies and industries into Michigan would mean that we’re back here a decade from now when the automobile industry takes another bad turn. And anyone who thinks the Big Three will ever have the same headcount it did five years ago is delusional.
Conservative groups are calling for elimination of tax breaks and subsidies to attract businesses here to Michigan. They claim it is a waste of time, and that those expenditures haven’t lived up to the forecasts for new jobs. That’s precisely the same short-term thinking that has put Michigan at the head of the pack when it comes to economic blight. Spending tax dollars to attract new businesses like high-tech software firms and new industries like the film business is a long-term investment: it won’t bring in jobs overnight but it beats the heck out of doing nothing and then whining about it when there are no results.
We can all hope and believe that the auto industry will come back. But Michigan needs to plan with the expectation that it might not. In the best-case scenario, more car jobs return to Michigan on top of jobs from other industries. Maybe then, the pity permeating over the telephone lines when out-of-state friends and family call may begin to dissipate.