Motown In Motion
It was a phone call Detroit Mayor Dennis W. Archer will never forget. Chrysler Chairman Robert J. Eaton was on the line from abroad in March, 1995, with an offer. "We're going to build an engine plant," Eaton said. "Do you have any interest?" The mayor's reaction: "I could have jumped through the phone to say thank you very much."
Today, construction crews are hustling to complete the $900 million factory on 107 industrial acres on Detroit's dilapidated East Side. For a city that has lost 40% of both its jobs and population since the auto industry's glory days in the 1960s, Chrysler Corp.'s investment represents a step toward revival. And there's more to come. On Apr. 9, the auto maker announced a series of capital projects that will bring its investment in the city to $2.1 billion.
Can Detroit save itself? The city's 144 square miles, among the most blighted in urban America, still are pockmarked with stretches of crumbling homes and abandoned factories. For the first time in decades, though, there is hope in Motown. With an ambitious, energetic mayor as their catalyst, the Big Three and other corporate heavyweights finally have decided to repair their dismal hometown.
General Motors Corp. is moving its headquarters to the riverfront Renaissance Center. The fortresslike complex, 25% vacant, has been an albatross on the city's office market since it was erected in 1976. A branch of the Ford family has put up $70 million along with $40 million from Ford Motor Co. to build a downtown football stadium for the Lions--right next to Little Caesars pizza magnate Michael Ilitch's new baseball park for the Tigers. And local banks have anted up $1 billion in loan commitments for businesses in Detroit's federal empowerment zone.
Motown's corporations could have poured more money into the suburbs and exurbs. But "frankly, we are embarrassed that Detroit has deteriorated beyond any other American city," Chrysler's Eaton says. The Big Three want to erase the negative image that Detroit's condition has on their own businesses. They're also getting property on the cheap: Chrysler received an $87 million tax abatement for its engine plant, and GM bought the Renaissance Center at the rock-bottom price of $72 million.
FRIEND OF BILL. But none of it would be happening without Archer, a 55-year-old lawyer and former judge friendly with President Clinton and well-connected in Democratic circles. Archer is a politician who has won CEOs' trust, unlike his irascible predecessor, Coleman A. Young. "The previous political leadership was extremely difficult to deal with," says William Clay Ford Jr., a Ford director and major stockholder, whose family owns the Lions. Archer, by contrast, has aggressively courted the corporate community.
Archer is emerging as one of the nation's most prominent African American politicos, with chances to become Michigan's first black governor or make a run for a U.S. Senate seat. The product of a poor Detroit family, he taught in the city's public schools while attending law school, then became a trial lawyer and ultimately, a Michigan Supreme Court justice. Now, the White House "loves him," says an Administration source. He passed up a potential Cabinet post, in fact, to seek reelection this fall. "A second term is very important to solidify all the things we have started," Archer says.
Fixing Detroit would be the ultimate urban turnaround. This is a city of 1 million people that, in 1993, had exactly one building permit taken out for a new house. Businesses fled Detroit in droves over the years because of high taxes, abysmal city services, frightening crime rates, and tense race relations. Even now, downtown streets are eerily vacant at night and on weekends. "I was one of those asking, how much worse can it get?" says GM Chairman John F. Smith Jr.
The outlook was so bleak that GM insiders say the giant auto maker had plans to uproot its Detroit headquarters and move to suburban Warren. Then came Archer. In private practice, his biggest client was GM. So Smith and other Big Three execs heavily backed his run for mayor. And once he took office, Archer recruited local execs for his transition team, met regularly with business leaders, and attended auto shows and Big Three events that Young had lost interest in.
LAND RICH. Business leaders returned the show of affection. Smith and GM Vice-Chairman Harry J. Pearce, in particular, championed the purchase of the Renaissance Center last year to replace the auto maker's antiquated headquarters in another part of town. GM since has unveiled plans for a huge atrium and waterfront park at the RenCen to generate some life in the commercial district. "We don't have a downtown now," concedes Archer.
It was, of course, the auto industry that hollowed out Detroit in the first place. In sweeping layoffs in the late 1980s, GM closed three major factories in southwest Detroit that employed more than 8,000 workers. "When those plants went, it just about closed the neighborhood down," says Carmen Munoz, co-owner of a small supplier that makes parts for engines and transmissions. According to census data, Detroit lost 270,000 jobs between 1960 and 1990--mostly in autos and related businesses.
Bringing those jobs back will require more than an engine plant and GM's headquarters: Detroit needs scores of small businesses to follow the auto makers' lead. "There is more land and space to fill than people realize," says Katherine F. Beebe, an urban planner who directed a citywide land-use task force. Archer points to the federal empowerment zone, which gives tax credits and other aid to employers in an 18-square-mile area, as a start: The scheme could create as many as 9,000 jobs. One beneficiary is the Hispanic Manufacturing Center, housed in a fledgling industrial park on the site of a onetime GM assembly plant. Munoz' company is one of four so far to move in.
Empowerment zones, though, are one of the few remaining federal programs aimed at cities; gone are such development levers as action grants and industrial revenue bonds. So Archer is determined to make the city's private sector a partner instead. To that end, he converted a once antagonistic city hall into a business-friendly place. After inheriting a $54 million deficit, he balanced the city's budget in the 1994-95 fiscal year, leading Standard & Poor's Corp. and Moody's Investors Service to restore Detroit's credit rating to investment grade last year. More important, he has tried to unsnarl the red tape that used to keep developers waiting for months for the simplest permit: Before Archer, "there was no confidence you could get things done," says Bernard Glieberman, a suburban developer building his first condominium projects in the city.
CASINOS COMING. On the surface, Detroit doesn't look much different than it did the day Archer took office. The stadiums and entertainment venues are at least three years away. Voters approved three casinos in Detroit last year, but it will be months before Archer even chooses among several companies competing to bring their slot machines to Detroit. Hoped-for retail shops and new housing downtown are hard to envision on the city's barren boulevards.
Still, boosters insist the revival is for real. "The cynics have ruled in this town for a long time," says William Clay Ford Jr. "But people like our family, the Ilitches, and the Big Three have their money on the line now. I wouldn't bet against us." That's good news for Detroit, since it won't get out of the ditch without them.