GM leaving Detroit?

Posted by: David Welch on May 11, 2009

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Could General Motors be headed out of Detroit? These days, nothing is unthinkable. During a briefing with reporters today, General Motors CEO Fritz Henderson was asked if the company would move from its glass tower headquarters in downtown Detroit. That idea was kicked around in the local papers last week. Henderson was hardly convincing in his denial that GM could move. He said “We’re looking at everything,” but added that “we don’t have any plans” to move the headquarters. That answer has even less conviction that George H.W. Bush’s “read my lips” quote about no new taxes.

Just think about the severe body blow to the Detroit and Michigan economies. The city is already a disaster. Reeling from years of layoffs, Detroit now has an unemployment rate around 21%. Urban blight is everywhere. The area around Detroit has fared slightly better (which is to say that it’s not a complete wreckage) but the region’s unemployment rate is around 15%. Parts makers teeter on the edge of bankruptcy, as does GM. Chrysler is already in court. And Comerica Bank moved its headquarters to Dallas a couple of years ago. Even Volkswagen of America got out of town, moving its U.S. office to Virginia.

If GM left for suburban Detroit, as one local mayor suggested, the move would simply mean that so many white-collar jobs were cut that GM could consolidate them to other Michigan offices, namely its technical center complex in Warren. No matter where the headuarters is located, the move would be in part a result of more job losses for the region. If the company got out of town altogether—which is less likely—the Detroit area would be permanently damaged. Ditto for the suburbs is Chrysler doesn’t make it. The company’s headquarters was designed to be converted into a giant shopping mall. But who will be left to shop there would be a mystery. If GM does follow Ford and Chrysler to the suburbs, the city’s tax base takes another hit. Even worse, it sends a signal that even Detroit’s oldest and most-stories companies don’t want to stay.

When people talk about the city rebounding, they point to Pittsburgh after the decline of steel. The three rivers aren’t lined with mile-long mills anymore. Only a few blast furnaces flash in the night sky anywhere near downtown. But Pittsburgh’s city center still houses the likes of U.S. Steel, Alcoa, Mellon and PNC Banks and PPG Industries. Major universities are a few miles from downtown. If Detroit starts to lose the last of its highly-skilled workers and jobs, forget about a recovery. The city will become a tale of urban decay like we have never seen.

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Reader Comments

Mears

May 11, 2009 07:54 PM

Maybe a blessing in disguise. The people would be relocated and then bulldoze the city. A true 21st Century city in its place.

jeff

May 11, 2009 08:19 PM

Sorry but this story is old news about
30 years, and the city isn't Detroit
its Flint and Pontiac Michigan

AJ

May 11, 2009 08:26 PM

I think they should move out. They need change badly. Moving out from detroit will give them that freedom. There is reason hyundai, kia has design center in CA. There is a reason companies like Tesla coming out.

bob

May 11, 2009 09:00 PM

Gm moved from the suburbs of detroit to the city less than ten years ago. They own the GM tech Center, which is a square mile facility just outside the detroit limits in warren mi. That is when GM was headquartered for years prior to the move to downtown. To say that if they moved back to their old facility the city or state would fall is rediculous. Ford is in Dearborn MI, does that mean that Detroit doesnt gain anything from it? Nice scary article, but it really doesnt say anything.

Thomas C. Inskip

May 11, 2009 09:05 PM

Bad news business practices makes enemies and their children remain enemies. The big three crushed or consumed so many creative persons that now – the creative fear all Detroit's systems as financial Wolverines.

This took year to complete.
No one can save Detroit from this self made fate.

Jackov

May 11, 2009 09:08 PM

CNN voted Deadtroit, "Worst Place to Live in America."

California has 9 of the top 10 cities in unemployment (No. 1 El Centro, with 24%). Some CA counties are considering decriminalizing misdemeanors.
Welcome to the end of the USA empire.

Mark Kaskin

May 11, 2009 09:11 PM

Let Michigan reap what it has sown. Decades of anti-business laws and taxes and a state government that is run by the UAW and their Democratic Party flunkies has come home to roost.

No company would choose to locate in Michigan when Texas, Arizona, Nevada, Utah, Idaho, and Colorado are available with better workers, less anti-business state and local government, and much lower taxes. That is why Texas is booming and Michigan is in the toilet and will stay there.

John Bryant

May 11, 2009 09:12 PM

At this point,GM needs to file for protection and get some relief. Goodbye to the unions....

Paul (Vw)

May 11, 2009 09:22 PM

>>> That answer has even less conviction that George H.W. Bush’s “read my lips” quote about no new taxes.

Less conviction? An interesting (if somewhat flawed) attempt at a comparison. G.H.W. Bush did make such a promise (and like most things he did, in good faith) but was later eventually forced by both sides of congress into breaking his promise. That's considerably different than denying at present that you might take an action when you might be actively planning otherwise. But if it fits the narrative...

Moving along...

>>> The city will become a tale of urban decay like we have never seen.

Businesses tend to relocate to areas which are favorable to their interests. The same goes with investment money. If Team Obama continues to extort concessions from secured creditors (with legal rights) in favor of others--what does that mean will happen to investment in our economy? If the legal stability *AND* predictability of our financial system is reduced to banana republic levels, investment money will flee (just like GM might flee Detroit).

For what it's worth, I hope GM stays just where it is in Detroit/Michigan. Though I'm sure it would excite some in the press if they relocated to a southern state.

Mikey..NO GM!

May 11, 2009 09:23 PM

GM will survive; however, it won't be anything like it used to be, regarding sales, importance, market share, etc. The old GM is completely gone, mostly due to management arrogance over a period of 30-35 years, and it will never be back. The crumbs will be picked up by Honda, Toyota, Ford, and a few others, as it should be. After watching this scenario for decades, it amazes me that a bunch of high school kids could have done a better job.

aa

May 11, 2009 09:42 PM

Detroit has been dead for years. Just like weekend at Bernie's, this just makes it official.

Detroit just never got it together, even Cleveland and Newark have been able to right the ship's damages from the 60's, Detroit has suffered from decades of mismanagement. 'Nuff said

justthefacts

May 11, 2009 10:14 PM

The authors predictions seem to be saying he should be a fiction writer instead of a reporter.

Steve

May 11, 2009 10:15 PM

Actually Detroit already a dying city. Just look at around downtown area, a lot of empty office building. I think Detroit need to go back to farming.

Wai Chui

May 11, 2009 10:20 PM

GM should not move the whole headquarters out of Detroit. Such a move is very disruptive and costly. But the executive offices need to leave. Boeing moved their executive headquarters from Seatle to Chicago. GM should do the same. They should move to Chicago, Atlanta, Dallas, or Houston, not to any suburb around Detroit.

The GM executives need to move to a city where GM is not the biggest company. That will give them a sense of reality. They need to interact with a lot of business people who are not in the automobile business.

madtupa

May 11, 2009 10:24 PM

Don't worry Detroit the city of Cleveland will be around to keep you company.

National City Bank now part of PNC(Pittsburgh Not Cleveland)

sevan claig

May 11, 2009 10:26 PM

Before we rush to scowl at GM for what their decisions MIGHT do to Detroit, try an HONEST take on who's been running the show in Detroit- and in Michigan for that matter- for all these years? The "working man's party" has done nothing for the working man here. Big D's Mayors tend toward the wannabe gangsta' in the nightclubs with his crew 7 days a week, the MItten's Governor ("you ain't seen nothing yet") raises taxes on small businesses trying to make it 365 a year while giveing 48% tax break to visiting Hollywood, and then there is the states two Senators (liberal landslide Levin and California Schemin' Stabenow) who have confiscated more pork dollars from Washington than anyone in the congress- and what to show for it? Really, what exactly to show for it?
Votes, apparently. In exchange for more poverty.

Still refuse to believe the opposition would have done better? Take another honest look westward to the conservative leaning Grand Rapids area, encompassing arguably one of the finest cities in the entire midwest.
People smiling through their own struggles, determined to remain kind and compassionate. A Mayor home on weeknights. Citizens picking up after themselves- AND OTHERS. Cranes still reaching high into the skyline. The differences go on and on.
Take a look for yourself, but please don't tell the statists, lest they come and screw that up too.

J S

May 11, 2009 10:36 PM

Since Cerberus is involved with both GM and Chrysler, and there was a rumored merger at one time between the two companies, they may be still working on something.

A more likely scenario is to move all the GM HQ to Chrysler's Auburn HIlls HQ after downsizing headcount at both companies a bit.

The two companies run separately, but share one massive building, and services like wind-tunnel testing, like some people get a roommate to split the rent.

GM would also avoid the high tax cost of being inside Detroit.

James H. Penland

May 11, 2009 10:39 PM

It is sad to say but GM and Chrysler are basically historical articles now. I would like for them to survive but cant see how it can happen. Maybe smaller and leaner making only Chevy, GMC, Caddliac, and Buicks without making a dozen models of each. Idea, retro the 57 chevy and the 55 buick with current engines and kaboom, a good bit of return business right there. I do feel sorry for Detroit because it truely has been the "motor city" for a long long time. Walter P Chrysler and Henry ford are probably crying in their grave by now. I forgot the fellow that started GM. Now that it is Government Motors, I don't guess it matters much. Well, I'll be hoping for you Detroit..

Charles

May 11, 2009 11:04 PM

Just as New York City has become a poster child for a total lack of corporate regulation, Detroit is the poster child for a total submission to union demands. In the final analysis, neither can be sustained.

Matthew M

May 11, 2009 11:36 PM

It would not make much of a difference if GM sold the Rencen and moved the jobs to its giant tech center property in Warren, various office-laden suburbs like Troy and Southfield - or took up residence in Chrysler's HQ in Auburn Hills as part of some deal with Fiat, perhaps in trade for Opel. Chrysler won't need a facility that big to run the pickup and minivan projects that are about all that is left of the Italian company's US subsidiary.

For the city of Detroit, having auto jobs available in SE Michigan for city residents is much more important than being the site of GM HQ.

Esox Lucius

May 11, 2009 11:44 PM

Detroit is an arm-pit. Those unions really did wonders for that city. Unions are parasites, and as is often the case with parasites, they are killing their host. Good riddance if you ask me. Toyota knows how to build an American car with American labor that doesn't suck. God bless the 10 non-union Toyota plants, as well as Subaru, BMW, Honda... they know how to make a car without sucking their host company dry.

Shane

May 11, 2009 11:49 PM

Forget funding GM, declare Michigan a disaster area, and spend the federal funding on the state.

Roger

May 12, 2009 12:02 AM

GM should do what is best for GM. Their job right now is to survive.

Snoz

May 12, 2009 12:04 AM

GM should not exit Detroit for the simple reason that they are both disasters of their own making and deserve each other's misery. The demise of GM mirrors the destruction of Detroit. Corrupt and incompetent city government officials coupled with an insane city income tax drove the middle class and entrepreneur out of Detroit in the midst of "White Flight." Those marooned within the Detroit's city limits were the financially troubled or unskilled or immobile. At GM, incompetent leadership within the Old-Boy-Network, unbridle greed and immorality of CEOs, whose self-interest ignored the corporate and shareholder interest, drove young talent from GM long ago. Just as for decades Detroit portrays itself as the Motor City, "Motown," despite the urban blight devouring its core like a malignant cancer, GM for decades marketed itself as the King of the auto industry despite having lost its core automotive business to the Asian competitors. Ironically, both are victims of their own successful propaganda. Both Detroit and GM deserves the death penalty as final judgment for death purges the incompetence, immoral, and the insane from Michigan while permitting a fresh beginning for the next generation.

Matt Boerger

May 12, 2009 06:43 AM

Wow, it is all the unions fault? Yes, history has shown that the UAW achieved a level of power that ultimately bound the arms of the American auto industry in its response to the emergence of foreign competition. But, I think that that overreach needs to be understood in the context of the management abuses that it was born of.

You are starry eyed, pro-business dreamers, who will usher in your own enslavement if you see this sad history as an endorsement of unfettered capital and the enfeeblement of labor and government.

TheAlabamaRambler

May 12, 2009 10:41 AM

"The city will become a tale of urban decay like we have never seen."

And therein lies the problem. Economies and business decisions are affected by the culture of the people in the affected area. If it is a slum it is because the people who live there choose to live like that, not because they are poor, under-employed or unemployed. You can be poor without letting your neighborhood go to pot... it's time that people take personal responsibility for their actions and decisions.

Provide GM (or any company) with a community that cares, has pride, is willing to work for their wages, and who can stay off drugs and alcohol and employers will flock to that area.

If a company leaves a place it is because that place has failed to provide an environment the company needs to be profitable.

MMcI

May 12, 2009 11:05 AM

I'm afraid a logical fallacy keeps getting repeated here.
Step One: Let'em die, they are all horrible, ignorant, greedy, deserving of no more than a crushing at the bottom of the populist shoe, etc.
Step Two: Like a phoenix, after all the evil is crushed, things will be magically better.
Logical fallacy: HOW IN THE HECK DO YOU GET FROM STEP ONE TO STEP TWO? Doesn't step one, by definition, make a giant hole that causes step two to be even harder, if not impossible? And what part of step two actually requires step one? I suggest there is no correlation. I propose that, despite the self-satisfying shadenfreude one can get from yapping about step one, let's all start talking about step two! Or, if you can't say something nice or productive, how about nothing at all? Too much to ask, I'm sure.

Kris

May 12, 2009 12:37 PM

I live in a Detroit suburb (regrettably) and I concur that Detroit is absolutely pitiful. I think the blame can be spread around, but let's not waste time pointing fingers. The inner city should be leveled (with the exception of a few architectural landmarks and historic neighborhoods), its population relocated to vacant housing the suburbs for free, and cutting edge architects and urban planners invited to reinvent Detroit as a 21st Century city that is a model of sustainability, supported by diverse businesses and industries. Gotta think big here.

None

May 12, 2009 12:54 PM

GM would be wise to move to a southern city where union boycotting would fall on deaf ears. My grandfather was a union leader in the southern steel industry and fought for things such as worker safety, integration of minorities, etc. All of this could be solved today in courts through criminal and civil actions. The auto-workers union sucked GM dry and is so one-minded they are willing to see GM fail rather than budge on having to pay for their own health care (keep in mind GM management pays for their own healthcare out of their paychecks).

I was in Detroit last week and was appalled to see what condition it is in. Yet, the population continues to elect corrupt Democrat mayors who have continued to be "pro-black" and "pro-union" rather than "pro-business" and "anti-crime." If they would cut taxes and decrease crime they might could see a glimmer of a rebound. It's hard to believe they have professional sport teams. I believe the final column to fall in Detroit is when the Red Wings leave town.

Keep in mind Detroit hasn't elected a Republican mayor since 1961.

M.J. David

May 12, 2009 04:45 PM

My Dad raised seven kids working a union, skilled-trade position at Ford Motor Co. Seven-day work weeks and 12-hour days were not unusual for him at the ever famous Rouge Plant. He’d often come home to a washer that needed repairing or the family car that might need new brakes. To read other people’s perception of these union auto jobs, I can’t figure out why he didn’t just go out and buy a new washer or a new car every year. He retired from Ford after about 45 years on the job. Admittedly, he retired with health care benefits and a comfortable pension that enabled him to keep his modest home in Michigan and a small trailer for “wintering” in Florida. But let’s be honest—he earned it.

He passed away in 2007 and I’m starting to think I should be ripping open mattresses to find all the $$$ he must have made while he was working his cushy union job. Ah, but then I remind myself to read between the lines. These men and women weren’t making the $70/hour that media outside of Michigan regularly quote as a union salary for auto workers. Rather, that’s GM’s labor costs for covering all of its labor expenses—including pensions and health care for thousands of its retirees.

Don’t get me wrong—I’m not saying there aren’t problems with the UAW model. But look around you. This economy is spotlighting a LOT of problems in a LOT of different industries--not to mention, even with non-American automakers like Toyota. But somehow Detroit carmakers and the UAW always stand front-and-center as the most convenient whipping boy. And the sad thing is, many of us are so used to it, that we just sit here and take it without speaking up.

I’ve never had occasion to work a union job, but I’m quite sure people who know me would tell you I have a great work ethic. And I’m proud to say it came from my parents. You can think what you want about auto workers and union workers in general, but from where I’m sitting here in Michigan, it just doesn’t jive with my reality.

–M.J. David

Dr.James A. Lee

May 13, 2009 08:34 PM

GM needs some real quality time to plan for the future. I just bought an American car. It is a fine car. We must all buy American. We must do the right time to do the right thing. Sure the other nations make fine autos,yet that is not the issue for America. We need more American thinking from a global perspective. The Brits do this well, the BBC covers the world. They see their opportunities from a world perspective. GM must start over. Detroit help build America now let us help Detroit.

Matthew M

May 14, 2009 04:06 AM

Management's biggest sin over the last few decades is focusing on reorganizations, mergers/acquisitions and high finance at the expense of the most important business principle: primacy of product. GM's leadership has long been groomed in its NY treasurer's office. Bankers and stock-jobbers are invaluable to business, but auto companies really do need car guys in charge so their products aren't an afterthought.

I don't know how badly the UAW should be regarded but they are getting a rude awakening about the necessity to have competitive productivity and costs. It has taken a long time, but reality is asserting the truth that GM cannot be both a carmaker and a social security scheme for retired workers.

The ultimate villain in all of this, however, is the government. The idiotic, immoral and useless (including environmentally useless) CAFE has forced automakers to make cars to meet the demand of bureaucrats instead of customers. Forcing cars to get small only drove people to SUVs they never would have been interested in otherwise. The wage/price controls in WWII created the perverse incentive for employer paid benefits which destroyed the private market for individuals, who have to use after-tax dollars to buy what tax laws allow companies to deduct.

CD

May 14, 2009 10:44 AM

For all of you anti-union people: Matt Boerger has a point.

Granted, was the UAW part of the problem? Absolutely. However, to say they WERE the problem is ridiculous. Remember, Rick Wagoner said one of his biggest regrets was killing off the EV-1, an example of short-sightedness on management's part as well.

Don't forget that many of the benefits that you enjoy today (better safety conditions, the 5 day/40 hour work week) came about because of the unions. Heck, the Japanese car companies gave good benefits because, in part, they figured out that this was the best way to placate workers into NOT forming a union.

So, before you throw the unions under the bus, don't be so quick to assume that you got a 'fair deal' from corporate purely out of the goodness of their hearts.....

detroiter for life

July 6, 2009 05:47 PM

Detroit is a beautiful city with way more character than other major cities. Everyone keep saying relocate to Atlanta. I challenge you to find the beautiful brick homes with picture windows and lakes and rivers in Atlanta. It does not exist. The design of Detroit and the freeway system is way more conducive than what is seen in southern cities. Detroit will bounce back and anyone who is not willing to help it bounce back needs to sit back and be quiet. The goal is to make it better for future generations and brainstorm to find ways to make it happen.

detroiter for life

July 6, 2009 05:47 PM

Detroit is a beautiful city with way more character than other major cities. Everyone keep saying relocate to Atlanta. I challenge you to find the beautiful brick homes with picture windows and lakes and rivers in Atlanta. It does not exist. The design of Detroit and the freeway system is way more conducive than what is seen in southern cities. Detroit will bounce back and anyone who is not willing to help it bounce back needs to sit back and be quiet. The goal is to make it better for future generations and brainstorm to find ways to make it happen.

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Want the straight scoop on the auto industry? Detroit bureau chief David Welch , Dexter Roberts and Ian Rowley bring daily scoop, keen observations and provocative perspective on the auto business from around the globe. Read their take on such weighty issues as Detroit’s attempt at a comeback, Toyota’s quest for dominance and the search for an efficient car.

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