Detroit has Died, but it hasn't fallen over yet

[tabs]

Originally Posted by jyl

Thought this might stimulate some discussion - here is a quick and dirty estimate of job recovery in the US auto industry over the next 5 years.



My q&d look suggests that, in the next 5 years, auto sales in the US will return to the replacement rate, which I believe is around 14MM units/year (based on number of drivers, age of existing vehicle fleet, useful life of vehicles, and number of vehicles per driver, the last I assume falls to the level of the early 1990s). Assuming the ratio of imported vehicles to domestically-produced vehicles is constant - Asian and European models produced in the US are counted as domestically-produced. Also assuming the industry's efficiency remains far higher than historical levels, but down a bit from current very high levels - most companies in the industry have cut employees so hard that their next move will be to add some back, although they are delaying it as long as they can.

This suggests the US auto manufacturing industry could add back about 210,000 jobs in the next five years. That's the Detroit OEMs like Ford and GM, the foreign transplants like Kia and Toyota and Honda, and the components industry like Magna, Lear, Borg-Warner, etc - note the components industry employs far more people than the OEMs. Which will still leave the industry well below peak employment levels of 2000, makes sense considering auto sales are assumed to be well below the record 17MM+ units of 2000.

This also suggests that the US auto manufacturing industry could hold on to much of the remarkable profit improvement it has achieved in the past couple of years. Many companies in the industry are making more profit and margin now than in 2000, despite units and revenues well below 2000 levels.

Truly, it is a good time to be Capital, in large part because it is a crappy time to be Labor. For the larger, more competitive companies in this country, profits are flowing at record or near-record levels.

Didn't you and I have a discussion about this back in 08? In that discussion I basically said that REPLACEMENT of the fleet was going to be it...and the US car market is only going to expand because of the growing population. Second didn't I say this would be a jobless recovery. That corporations would be doing just fine especially if they had international exposure while the American worker became under employed.

You are just about the best financial analyst on the Board..U should really tell the Boyz just how close to the mark some of my little predictions are..


Detroit's problems started back in the late 60's with the urban redevelopment agency, the Liberal governments that were installed...the declining US auto makers...and the move to right to work states.

Quite frankly I got tired of reading about your Detroit revitalization plan..and had to chock it up in a simplistic way as that U live in the Bay Area...Nancy Pelosi land or Liberal Central.

[john70t]

The cheap housing is there, but falling apart. The factorys are there but falling apart. The centralized water distribution gateway to the midwest is still there.

Union wage/retirement/medical demands are also still there, as is the Michigan taxation system and low international tarriffs.
New tires ain't gonna fix rod knock.

[CurtEgerer]

Originally Posted by Hugh R

How odd this thread came up today. I'm back here in Detroit as of last night for the same TV show. I'll report back on the fires and stuff later today. I'm a SoCal boy, its about 50 degrees out right now and very windy. I'm used to warmer weather.

I'll be in little Arabia ... er, Dearborn on an investigation tomorrow (suspicious fire ... go figure ). Are you driving a rental with decent ground clearance? Did you get the insurance? Maybe we can do a few hot laps with it at the velodrome

If you need a laugh, pick up a newspaper. The imprisoned former mayor and son of US Rep Cheeks Kilpatrick is back in the news, as is the wife of US Rep John Conyers and former city council person packing her bags on the way to prison

[john70t]

Add Colman Young as a topping

[Crowbob]

Not only that one of the big shots on the Board of Detroit Public Schools is being sued all over the place for exposing and fondling himself at meetings, in his office, etc. Plus, the former Chief of Police and his replacement are being sued for sexual harassment because they were allegedly doing the same detective who got all kinds of raises and promotions and, at her behest, had her enemies demoted. Not to mention the rest (dozens) of the crooked school personell under indictment for pocketing money and charging home improvements to the schools. And lest we forget, what about the county commissioner(s) not paying property taxes because they 'forgot'. Detroit has more problems than simple infrastructure deterioration.

[jyl]

Granted all that - my main point is that, just as getting too optimistic is not a good idea, being too pessimistic is also something to watch out for. Things are usually neither as good nor as bad as people say.

The auto industry is a good example. As tabs said back then, a sales rate far above replacement rate was not sustainable in the long run. But a sales rate far below replacement rate, and everyone losing tons of money, is also not sustainable in the long run. Things were very grim entering 2009, plenty of people said the US auto industry was doomed and they'd all go bankrupt with 1MM jobs lost forever. Well, the industry has gotten back on its feet, most of the stocks went up 5X to 10X from the lows, and I think auto employment will probably go up another 30-40% from here. Just like with TARP, the US govt/taxpayer will probably not get back all of its money, but will probably get back most of it.

If the auto industry can fight its way back, can't the Motor City do the same? Yes, but it will take a lot longer and will probably require all kinds of government action - at the local level, this time.

[Hugh R]

I've been downtown Detroit the last two days, Woodward and Grand River area. It's strange, nobody on the streets, light traffic, most buildings closed up. Strangely, no trash on the streets at all, I mean none, no graffiti. This is a great backlot for a studio, we can do car chases, burn down houses, literally. Like hey can we burn down those two abandoned houses?", "Sure, why don't you burn down those ten abandoned houses in a row".

I toured the Ford Rouge River plant today, it's pretty cool, you only get to see the final assembly for the F-150, but the place is fairly modern.

I think what JYL said is dead on correct. This city has an opportunity to re-invent itself. Lots of land and building dirt, dirt cheap. if you're a manufacturer or service company you could get land, buildings and labor with probably great tax incentives. Detroit is giving us 40% tax breaks on everything, including the 90% of our crew that is imported from California and send their paychecks back to CA. They think we'll stay here because their so film friendly when the tax breaks end, IMHO, they couldn't be more wrong.

[Hugh R]

Not a great shot, but I can see this building from my hotel room here in Detroit, it's obviously abandoned. What an amazing feat of enginnering in it's day, now turning to dust. It's a shame.

[wcc]

Originally Posted by Hugh R

I've been downtown Detroit the last two days, Woodward and Grand River area. It's strange, nobody on the streets, light traffic, most buildings closed up. Strangely, no trash on the streets at all, I mean none, no graffiti. This is a great backlot for a studio, we can do car chases, burn down houses, literally. Like hey can we burn down those two abandoned houses?", "Sure, why don't you burn down those ten abandoned houses in a row".

So you are an arsonist? Just Kidding! If you do it let me know it may be worth the drive down to watch....

That pic you posted is creepy. It's been a while since I've been down that way it looks more like a ghost town than I remember. Detroit could be the birthplace of zombies! LOL!

[john70t]

Originally Posted by Hugh R

This is a great backlot for a studio, we can do car chases, burn down houses, literally. Like hey can we burn down those two abandoned houses?", "Sure, why don't you burn down those ten abandoned houses in a row".

Kurt Russell isn't that old.... Wait 'till devils night and make it a quazi-documentary.

[t-tom]

Originally Posted by Hugh R

Not a great shot, but I can see this building from my hotel room here in Detroit, it's obviously abandoned. What an amazing feat of enginnering in it's day, now turning to dust. It's a shame.

Thats the old train station isn't it?

[daepp]

A bit off topic, but does anyone recognize the music in the Velodrome video?

[CurtEgerer]

I was wondering the same. Good tune. Anyone?