x Abu Dhabi, UAETuesday 25 July 2017

Why Detroit's car bosses can help restore its economy

Detroit's woes are cavernous, but its car companies are at least beginning to fix themselves.

Sergio Marchionne, CEO of Fiat and Chrysler Group. Larry W Smith / EPA
Sergio Marchionne, CEO of Fiat and Chrysler Group. Larry W Smith / EPA

Strange, isn't it, that one of the seven cities twinned with Detroit is none other than Dubai. Apart from a rather flat topography and the fact that Dubai has a Motor City while Detroit is Motor City, I can't think of a single thing the two places have in common.

And the enormous differences between these cities are only made more stark by Dubai's recent financial regeneration. It's a place on the up, while Detroit is so far down the tubes that, only a couple of months ago, Michigan state senator Rick Jones suggested that the only way to save it was to get rid of it entirely, dissolving it and having it swallowed up by the surrounding Wayne County.

It's depressing to see a city that was once so proud now ravaged by violent crime, absolute poverty and very little to offer its youth in the way of hope. After having spent just four days here, I am ready to return to the warmth of the country I now call home. Motor City has stalled and I'm not sure it will ever be able to prime its fuel pumps and restart its engine.

So who is to blame for this turnaround of fortunes for Detroit? GM? Ford? Chrysler? While it would be easy enough to point the finger at any of them, Detroit's problems have been steadily building for decades. The city's revenues have been hammered by the collapse of manufacturing, plummeting property values and the mass exodus of people to the suburbs. And, all the while, Detroit's costs have not decreased at the same rate. It's still paying out pensions, entitlements and salaries far larger than it could hope to afford.

Can the car companies do anything to help? Not really, as anything now would be a case of "too little, too late". The GM Foundation, for instance, donates millions of dollars every year to various projects and economic growth institutions but it's merely a drop in the ocean. Instead, Chrysler and General Motors, who both faced bankruptcy just over three years ago and had to be bailed out by the American taxpayer, are doing all they can to survive themselves.

Ford, despite being in dire financial trouble like GM and Chrysler when the global crisis hit, didn't file for bankruptcy, nor did it have to go cap-in-hand to Obama's administration for a bailout. But what saved Ford was some extremely complex and clever financial restructuring, which had begun long before the other two turned their pockets inside out. Ford borrowed some US$12 billion (Dh44 billion) at the peak of the credit bubble, right before the recession hit and vehicle sales dropped by more than a third. By maintaining liquidity, Ford's financial strategy paid off, but it was by no means free from guile.

Chrysler and GM only survived the crisis by changing the ways in which they worked. Like many colossal manufacturing firms, they had allowed complacency to get the better of them, churning out cars that simply could not compete with the Europeans when it came to quality or reliability. There was so much time and money being wasted that only a sea change approach would ensure their survival, so when Fiat took control of Chrysler and the government sent its own people into GM, attitudes had to change. And now the management is talking about it quite candidly.

So the private jets for the companies' top management people were parked and processes were examined, changed and streamlined. Both firms had to adopt an attitude of "if it doesn't earn us money, then we have to change it or stop doing it."

This change in attitudes has probably, for me at least, been most manifest in the way the top brass is openly contrite about the past. When the Cadillac ATS won the Car of the Year award at the Detroit motor show, there was no bullish posturing or yeeehaa-ing. Instead there was the occasional, silent, fist being punched into the air and a sense that, while it was indeed fabulous to be recognised for a great job, Cadillac and the rest of GM had the narrowest of escapes and only survived because the government had to stop its collapse. In so many ways, these companies deserved what happened to them, but the people who depend on them for employment deserved better.

So now we have GM's hierarchy practically admitting that the previous ranges of cars really weren't that good after all. And this turnaround in attitude is what's responsible for the dramatic improvements being seen wheeled off the production lines right now. Take the new Corvette Stingray, for instance. No matter what you might think of its physical looks, to sit inside that car is to experience intelligent design and modern, quality materials that mean it can actually compete with the best that there is.

Ryan Vaughan, Chevrolet's interior design manager, told me: "We had previous constraints removed and we were able to approach the design of this car with pretty much a clean sheet of paper. And one of the stipulations we set ourselves was that, if it looked like it was made from something, it had to be made from it. If you see carbon fibre on a Stingray, it's real. The leather is much better quality and we've given the plastics a softer feel."

The results are extremely impressive, even to a hardened hack like myself. And even though GM doesn't expect to sell many Stingrays in the grand scheme of things, it still feels confident that sales growth across the board will be experienced this year.

Doug Parks has been an engineer at GM for 28 years and was recently promoted to vice president of product programs. Talking of the company's bankruptcy to the Detroit Free Press this week, he said: "I was embarrassed. It was clearly our fault. Lots of people have been broomed. You can't let anybody else own that or try and fix that for you. That was ours; we own it, and we're going to make sure it never ever happens again."

On the face of things, these are not mere empty words. GM has had to swallow its pride and Chrysler's new approach to honesty when it comes to product development is, indeed, refreshing. However, from what I have seen of the city that's home to both of them, much more is needed. The problems faced, the extent of urban decay all around, the huge numbers of people forced to sleep rough on the streets in sub-zero temperatures - these things are all way beyond the abilities of a few car companies to solve. But at least they've started fixing themselves.