As Car Companies Fiddle, Detroit Burns

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The Big Three have a history with Detroit that goes back a century. Ford Motor Co. (NYSE: F), some divisions of General Motors Co. (NYSE: GM) and Chrysler had their beginnings in Detroit, which shortly will fall into bankruptcy. Do the car companies have any obligation to Detroit? Perhaps not ethically, and perhaps not based on profit goals, but the metropolis started to crumble long ago. There is no evidence that any of the car companies made even the most modest efforts to help.

The only one of the Big Three that maintains its headquarters in Detroit is GM. Ironically, its headquarters are in the Renaissance Center that Henry Ford II helped build. GM’s headquarters was for decades downtown. Ford’s is in nearby Dearborn. Chrysler’s is in Auburn Hills, much further away. Neither city is wealthy, but both look like palaces compared to Detroit.

The car companies also do not keep large factories in Detroit. Their U.S manufacturing is spread to places like Kentucky, Indiana and Ohio. Some production has been moved to Mexico, where labor is cheaper than in America. Each of these plant locations has been set to keep costs low and probably because of the efficiency of shipping from them to other parts of the country.

Many of the skilled blue-collar workers who worked in the U.S. car company factories in Detroit lost their work years ago, and the greatest blow came when GM and Chrysler went bankrupt. Assembly line workers in Detroit either joined an army of long-term unemployed workers, or migrated to places where they could find jobs. Now, the city proper has only 714,000 residents. In 2000, Detroit was the 10th largest city in America; it is now the 18th. Decades ago, Detroit’s place based on the same measurement put it in the top five. In 1950, the city had nearly 1.8 million residents.

A list of the largest employers in Detroit measures the extent to which the car companies have left. Among them are the city itself and hospitals. If Detroit goes bankrupt, the number of people who work for the city will shrink.

The Big Three might have lost something in margin if they had remained in Detroit with a modest presence. And Ford and GM have been willing to sustain huge losses in other areas, particularly Europe. Each of the three corporations might have thrown Detroit a bone, but that did not happen.