Can Detroit Be Saved?

By 1973, the city elected its first black mayor, Coleman Young, who inherited an economic mess–a staggering fiscal crisis, municipal employee layoffs, and the threat of plant closings. He brought the city back from the brink of bankruptcy by revitalizing the city’s waterfront and, in the process, bolstered the black entrepreneurial class through his administration’s minority set-aside program.

As the city was being redeveloped, however, the gas crunch of the 1970s helped open the door to competitive pressures from foreign automakers. Models that were smaller, more fuel efficient, and cheaper to make than American muscle cars enabled companies such as Honda and Toyota to grab a foothold in the American marketplace and take market share from the then-reigning Big Three: General Motors, Ford Motor Co., and Chrysler Corp.

By the 1990s, Detroit was enjoying a boom due to the growing economy and a vibrant manufacturing sector. Then-Mayor Dennis Archer presided over a city that was ranked No. 1 by Industry Week magazine on its listing of world-class communities. Black businesses, particularly auto suppliers and car dealers, grew at an exponential rate. By 1998, Michigan had more be 100s companies than any other state in the nation.

“The automotive industry was very good to black entrepreneurs here, but it also made us collectively not as aggressive on our game because it was such a lucrative industry,” says Louis Green, president of the Michigan Minority Business Development Council. “There was no urgency to diversify or explore other options.” And when all-time highs for crude oil combined with the subprime-fueled erosion of the U.S. economy, this perfect storm sent the auto industry into its worst slump ever–and took Detroit with it.

Diagnostic Measures

So the prognosis is simple: Detroit must attract industries outside of the struggling automotive space, wooing both large corporations as well as fostering entrepreneurial growth. Since no single industry can produce the job and wealth creation the auto sector did in its heyday, the city must transform itself into a magnet for as many industries as possible. This renaissance will also be fueled by the development of small businesses and minority-owned enterprises (blacks comprise 81.6% of the city’s population). For instance, automotive suppliers must rethink their business plans. “We’ve got to recognize that new entrepreneurial efforts, startup companies, new companies from overseas, or part of the wind wave–solar, advanced energy storage, battery systems, biomass systems, geothermal systems–are going to be key,” says Keith W. Cooley, president and CEO of NextEnergy, Michigan’s renewable energy industry accelerator.

It’s not like the Motor City doesn’t have its plusses though. After all, the area was a strategic trading post in the 1700s and 1800s because its vast waterways made it accessible. It also has extensive highway and rail systems. In fact, 60% of the U.S. population can be reached overnight from Detroit by land or sea. Then there’s the access to the Canadian market by way of nearby Windsor, Ontario. And it has two college campuses: University of Detroit and Wayne State University. Combined with a willing workforce, low-cost housing,  cheap factory space, and a major international airport, you have a city with the ingredients needed to participate in a 21st century economy.